Excess withdrawal from inherited IRA
My mom left an inherited IRA for me when she passed. My tax prep guy told me I could draw more than the RMD from the inherited IRA. I attended a seminar and asked the presenter about this and he told me that I should not take withdrawals in excess of the RMDs because it might cause the entire IRA to be consider taxable in a lump sum. Now I’ confused who is correct?
Permalink Submitted by Alan Spross on Wed, 2011-03-23 20:17
The seminar info is incorrect. You can take whatever amount you wish from the IRA, but of course the distribution will be taxable. Your only requirement is to take at least the amount of the annual RMD on time each year. One critical thing you need to know is that any amount you withdraw CANNOT be rolled over since this is a non spouse inherited IRA. If you want to move the funds to a different custodian, it must be done by direct transfer only.
Check to see if your Mom had and basis in the IRA from making non deductible contributions. If she did, you inherit your share of this basis and part of your distributions will be tax free. You would file an 8606 on your return, and to check this out you would look for Form 8606 on her prior returns.