Penalties on distributions in excess of RMD for a beneficiar
We have a client who inherited her father’s IRA. Father was age 50 when he died in Oct 2009; beneficiary owner is age 14.
If she takes a distribution from the IRA in excess of the RMD for 2010 will she be subject to the penalty for withdrawals taken before 59 1/2?
Permalink Submitted by Alan Spross on Wed, 2010-09-29 18:13
No, there is never an early withdrawal penalty on an inherited IRA. Of course, she will have to pay the ordinary income tax, and if the other parent is still alive, be aware of a possible kiddie tax exposure. IRA disrtibutions are considered investment income of the child.
The only penalty exposure on an inherited IRA is for failure to take RMDs, and that is a stiff penalty of 50% of the RMD amount not taken.