Message Font: Serif | Sans-Serif
No. of Recommendations: 0
Greetings, Todd, and welcome. You wrote:

<<My mother-in-law passed away in 99. She left a little money in her IRa that my wife and her brother inherited. In total it was aroun 150,000 to be split between the two of them. We have talked with several accountants and the IRS and get different answers from all of them on what we can do with it. Does anyone know of a good place to get the right answer? We would like to leave it in the IRA if at all possible but the irs says we have to remove before the end of the 5th year.>>

Non-spousal beneficiaries must take and be taxed on a distribution from an inherited IRA. In essence, non-spousal beneficiaries have two choices on how to take distributions.

1) The Lump Sum: No later than December 31 of the fifth year following the IRA owner's death, non-spousal beneficiaries may cash in the IRA without penalty, pay ordinary income taxes, and keep what's left.

2) Little by little: Non-spousal beneficiaries may have the IRA proceeds paid out over their own life expectancies and pay ordinary income taxes on the amount distributed each year. The election to have the IRA distributed over their lifetimes must be made and implemented no later than December 31 of the year following the year of the IRA owner's death. If the election is not made by that date (and, hey, that's more than a full year to decide), then all the proceeds must be withdrawn and taxed no later than December 31 of the fifth year following the death. If the IRA owner was over age 70 1/2 and had begun receiving minimum required distributions (MRD) (see Ya Gotta Take it Sometime [link]) during his lifetime, then the IRA proceeds must be distributed at least as rapidly as they would have been under the MRD schedule.

Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.