Inherited IRA
Dear Ed Slott and Company Person,
I inherited an IRA from my mother who passed away in November of 2017. I belief she had taken her RMD for that year.
I transferred the account into an original owner named inherited IRA in 2018(mom in beneficiary for john)
But have not taken ANY withdraws from the account since inheriting the IRA.
She was 89 years old, I am now 59 ½.
Do I fall under the 5 year rule and don’t need to withdraw anything but need it completely gone by 5 years?
Do I fall under the 10 year rule and don’t need to withdraw anything but need it completely gone by 10 years?
Or do I fall under my life expectancy for remainder of money?”
Also could I change RMD or have to follow any withdraw rules, if I can use my life expectancy rule?
It is in a major investment company’s money market account, does this have any stipulations that I have to follow?
IE: take half out this year (4th year) and half out next year (5th year)?
Thank you for any assisted and or advise.
V/R
John
Permalink Submitted by Alan - IRA critic on Thu, 2021-12-23 18:29
You still fall under LE RMDs, the 5 or 10 year rules do not apply. But you must make up the missed RMDs and file Form 5329 for 2018 and 2019 to request the IRS to waive the penalty. If you can squeeze in your 2021 RMD before year end, you will not have to file a 5329 for 2021. 2020 RMDs were waived due to the CARES Act.
Assuming you were 56 at the end of 2018, your 2018 beneficiary RMD is determined by dividing the 12/31/2017 inherited IRA balance by 28.7. The 2019 RMD is determined by dividing the 12/31/2018 balance by 27.7. No 2020 RMD. Your 2021 RMD – divide the 12/31/2020 balance by 25.7. You should first figure your 2021 RMD and call the custodian ASAP to see if the 2021 RMD can be distributed this year.
Then download two 5329 forms – the 2018 and 2019 editions. First, calculate the late 2018 and 2019 RMDs and ask for a distribution of those two late RMDs. Complete the 4 lines of each 5329 according to the Instructions for Form 5329. They are not intuitive, so read the instructions carefully for what goes on each line. Include a short explanation of why the RMDs were late, ask for the penalty waiver and mail both forms to your IRS service center.
If you think there is a chance that you can figure the total for all 3 years and get the total distributed, you could just add them up and ask for a check for the total. Before year end, either just take out the 2021 RMD or all of them. Do not split these up any other way that would leave a specific year partially distributed. It will cause too much confusion with the IRS. If the IRA is entirely in a MM fund, the cash is ready to go and you will not have to sell any securities to fund these distributions.