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Subject:  Inherited IRA Date:  12/8/2013  6:20 PM
Author:  brucedoe Number:  119670 of 129771

When my wife retired from Westinghouse many years ago, we took a buyout of her retirement as an IRA. The beneficiaries are her two sons by a previous marriage (fine by me). My understanding is her sons can:

Stretch that IRA over a lifetime, and create a legacy. Once you have your non-spouse inherited IRA in a properly titled account, you should use the single life expectancy payout if at all possible. That payout option will let you stretch the distributions from the inherited IRA over your lifetime. Read the rules about distributions in IRS Publication 590 on the IRS Web site. If the original IRA owner was required to take a distribution in the year of death and didn't, then the beneficiary must take it.

One of the sons has had his 59th birthday and the other 58th (both from a previous marriage). I assume they can choose to "stretch the distributions over their lifetime." Does this mean they must take an RMD each year even though they have not reached the age of 70-1/2 or must they start taking the RMD next year?

The reason I ask is that my wife is terminal and may die tonight. It will not be an issue this year because we withdrew a lot of money from our IRAs earlier in the year to come up with money to enter a continuing care facility so we have fulfilled much more than the RMD for this year.

When the IRA is divided, must everything be sold first or can assets be distributed pretty equally? I would hate to have to sell the preferred stocks which would have to be sold at a loss when the dividends are in the range of 6.5% - 8%.

Are the rules for a 401K plan the same as an IRA? My wife had a Westinghouse Saving Plan (before tax) from which we had been taking an RMD. The Westinghouse plan, however, was morphed into a CBS 401K plan. I changed the beneficiary from me to the two sons just a few months ago. Must this be cashed in or can the two sons continue it or convert it into IRAs? In this case, an RMD is required for this year so it must be taken, I assume.

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