Cashing in inherited IRA
Client’s (age 19) father (age 62) died unexpectedly. Will she be accessed the 10% under age 59 1/2 penalty if she decides to cash out the IRA and take to money? If not, is there a time limit on when she can take the distribution without penalty. Thanks – this is a great forum.
Permalink Submitted by Bruce Steiner on Fri, 2010-07-16 15:56
She’ll have to take distributions over her life expectancy. But she can take out more, or all, without penalty.
Assuming that the family has other money to provide for her until she finishes school, she should compare the benefit of maximizing the stretchout against the benefit of taking distributions over the period while she’ll be in a low tax bracket.
Permalink Submitted by Anonymous (not verified) on Sat, 2010-07-17 05:13
adding to the last reply:
It would be foolish to take a full distribution, especially if the amount is large (50, 100, 500K). This would propel the amount taken into the highest tax bracket. I would rather stagger the amounts over several tax years, if the money is really needed. This can be easily accomplished by merely waiting for Jan 1 every year.
Unfortunately, a 19 year old left as sole beneficiary can pretty much do as they please…..
pko