Inherited IRA-Change From Minimum to Higher Annual Amount of Distributions
A individual Beneficiary ‘inherited” an IRA from a Parent’s IRA and is currently receiving a “Minimum Required Distribution” base on the Beneficiary’s Individual Age-Can/May this Inherited IRA Beneficiary “Change” from a MRD to a Higher Amount[the inherited IRA was created over 5 Years Ago]- without a IRC Section 72 10% Penalty as the Inherited Beneficiary is under Age of 59 1/2?
Is this new, updated distribution still classified on account of “Death”? Can this Inherited IRA Beneficiary -later on “Change” Election back to a MRD for future taxable years? Thank you-Richard
Permalink Submitted by Alan - IRA critic on Mon, 2016-05-16 17:33
There is never an early withdrawal penalty on an inherited account, and the 1099R should still retain the death benefit code of 4 in Box 7. There is no restriction or penalty on taking out as much as the beneficiary wishes in excess of the RMD. The only penalty exposure is for taking out LESS than the RMD amount. Beneficiary can therefore take out more than the RMD in any year and change back to the RMD the next without penalty.
Permalink Submitted by Richard Weintraub on Mon, 2016-05-16 19:10
Thank you for a Clear Concise Answer. So Evenif 10-15-20 Years after an Inherited IRA original distribution-It is always on account of the Original IRA Owner-Decdeant’s Death-So Do Not Care if any Iheirted IRA Beneficiary is Under/over 591/2-No 10% Penalty & the Inherited IRA Beneficiary Can Choose on an Annual Basis to Take More Or less as Long as over the MRD? O.K. Just for Curiousity Sake: I f the original Inheirted IRA Beneficiary Dies-an a “New” Inheirted IRA Beneficiary is now the “new’ nherited IRA Beneficiary-No 591/2-Worries?-Thank you-Richard
Permalink Submitted by Alan - IRA critic on Mon, 2016-05-16 19:23
Yes, you have it. If the original beneficiary dies, the successor beneficiary must continue the RMD schedule of the original beneficiary as if the original beneficiary had lived. There continues to be no penalty unless the RMD is not satisfied.