Non-spouse inherited IRA
If a child set’s up an Inherited IRA I know they must take their RMD over their life expectancy, but can they take out more if needed in a few years without penalty? My memory tells me they can – but I don’t count on that anymore!
Thanks.
Permalink Submitted by Alan Spross on Mon, 2008-10-27 20:52
You are correct, there is no maximum limit on the amount that can be distributed. There is no penalty on distributions, only ordinary income taxes. Of course, there is a penalty for failure to take at least the RMD amount.
If the child is between 14 and 23, distributions might trigger the kiddie tax since the IRA is unearned income. Total amounts over 1,800 may be taxable at the parent’s marginal rate, so this is something to be wary of.