Inherited IRA Distribution
My mother has recently inherited an IRA from her sister. It has a balance of ~$250k. She would like to check out all the available distribution options available. From what I know, she can:
1) Withdraw the entire balance within 5 years (with no requirement to withdraw on any particular year).
2) Withdraw the minimum required amount determined by the life expectancy factor (she is 70 so, life expectancy factor = 17).
Woud she be able to withdraw an amount that is higher than the minimum required distribution amount but lower than the amount in option 1?
Also, in terms of the life expectancy factor, my mom is still married and is the sole beneficiary of the IRA. I should use the value in Table 1 of Pub590 from IRS, correct?
Thank you for your input
Permalink Submitted by Alan Spross on Fri, 2008-08-08 02:43
Option 1 only applies if her sister passed prior to her required beginning date, which is 4/1 of the year following the year she reaches 70.5.
If she passed after that date, your mother’s only option is life expectancy per Table I. If her sister passed in 2008, then your mother’s first distribution year is 2009 and her age would be based on her age as of 12/31/09. If she is 70 now, that age could be either 71 or 72. Her divisor would be based on the correct age and be either 16.2 or 15.5 and then would be reduced by 1.0 for each year thereafter.
In any year she wishes she can take out more than the RMD, she just cannot take out less.
Permalink Submitted by Al Fry on Fri, 2008-08-08 16:24
Or lump-sum.
Permalink Submitted by George Sun on Fri, 2008-08-08 18:20
Thank you all, for your info. The deceased has indeed begun to withdrawal from the account last year. So, I guess option 1 is no avilable to my mom any more. Now, I have a question, hopefully not a stupid one. Since my mom can take out more than the RMD every year, she can still deplete the entire account in 5 years (essentially replicating option 1), right? or is there any added penalty for doing that? Thanks again for the help.
Permalink Submitted by Al Fry on Fri, 2008-08-08 18:52
Correct, as long as she takes out the death RMD each year until then. In fact, many advisors NEVER recommend not taking anything out until the 5th year even when owner passes prior to RBD. That way, if they change their mind later (a lot can happen over for years), they can just stay with the stretch, without penalties.