I inherited an IRA from my mother that passed away in 2010. Need some advice.

Submitted by Marguerite Klumb on Wed, 2016-08-24 00:41

Hi there! I inherited an IRA from my mother who passed away in 2010. It is my understanding that I need to withdraw the total amount of the IRA within 5 years which would have been last year 2015. I actually have not filed my taxes for 2015. I need some advice on how to proceed. Thanks!



Submitted by Alan - IRA critic on Wed, 2016-08-24 01:28

How old would she have been at the end of 2010?



Submitted by Marguerite Klumb on Thu, 2016-08-25 18:16

Hi there! She would have been 59 years old at the end of 2010. My parents were going through a divorce when my mother passed away. I actually did not learn about the IRA until the divorce was finalized in August of 2013. Also since my mothers trust was not funded, everything went through probate. It was a huge mess. Hope this additional info helps!



Submitted by Alan - IRA critic on Thu, 2016-08-25 19:02

It does help, but now I have another question. You indicated that “everything went through probate”. That probably means that you were not named as the IRA beneficiary on the IRA agreement, and that the IRA beneficiary was actually her estate. If this is correct, then the 5 year rule applies and the IRA should have been fully distributed by the end of 2015. If so, you should withdraw the balance now, and that will be reportable on your 2016 taxes. But with your 2015 return, you should file Form 5329 and request a waiver of the 50% penalty for “reasonable cause” and explain why you were late in an explanatory statement and that you have fully distributed the IRA balance. The IRS will probably waive the penalty, which would have been 50% of the IRA balance on 12/31/2015. If any of my assumptions is incorrect, please advise.



Submitted by Marguerite Klumb on Thu, 2016-08-25 19:40

In 2013 the IRA was transfered from my mother’s estate to her trust and Edward Jones then set up and transfered into an account for me. I’m also wondering how the estate taxes play into all of this? Thank you this is all very helpful!



Submitted by Alan - IRA critic on Thu, 2016-08-25 21:20

  • OK. The iRA initially was inherited by her estate and therefore the 5 year rule does apply. My prior post explains what you should do now. Since your mother passed in 2010, there is no estate taxes due because for 2010 only there was no estate tax.
  • Again, since the deadline to file your 2015 taxes is 10/15, and it is probably better to file the 5329 with that return rather than later on, you should take the full distribution before filing since you can then indicate on the 5329 request for a penalty waiver that you have fully distributed the IRA.


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