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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.

brucedoe
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Condolences on your expected loss.

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?

Yes. I've got an inherited IRA from my father, and I started taking RMDs when I was 45. I'm about to turn 58, and so far the growth of the account has been a bit more than the RMDs. That won't last forever, as the growth bar gets higher each year.

When the IRA is divided, must everything be sold first or can assets be distributed pretty equally?

The assets can be distributed equally.

You'll want to be in contact with the custodian to see how they handle this. The most straightforward way is, if the IRA holds 100 shares of a given security, each of the two heirs get 50 shares of that security. There may be some things that are not divisible; if this is the case, the custodian will need to distribute equal value to the two heirs. (This assumes the two beneficiaries are each due 50% of the IRA; if it's a different split, use the actual percentages.)

When I got 20% of Dad's IRA, there were a couple of things that weren't divisible. Dad had a professional firm as the executor. The rep doing Dad's estate talked to us and assigned the stuff that couldn't be divided in fifths as we all agreed, with more finely divisible assets being split to give the five of us equal value. We also had a dance with an RMD for the year of Dad's death, which your stepsons won't have to deal with.

What the heirs do with it after it splits is their business. If one of her sons wants to hold the preferred stocks and the other wants to liquidate them, they can each act as their situation and preference dictates.

Patzer
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Are the rules for a 401K plan the same as an IRA?

I'm so sorry your need for this information is so immediate.

The law was changed a couple of years ago to allow the same treatment for non-spouse 401(k) beneficiaries, but plans were not required to change their rules. You'll have to check with the plan. Assuming they did update, it must be a direct transfer from the plan to the beneficiary's inherited IRA.

As for this year's RMD from the 401(k), it's the same as for IRAs. If it's distributed after the date of death it goes to the beneficiaries.

IRS Publication 575 has the info on 401(k)'s.

Phil
Rule Your Retirement Home Fool
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Bruce,

My condolences. May your wife have a peaceful night.

My siblings and I inherited a couple of IRAs from Dad two years ago. He passed mid-December, not having taken an RMD from one of the accounts yet. After many rushed faxed forms they disbursed the RMD divided by the six of us, each of us accountable for the tax on our portion of the RMD. The tax on the RMD he had taken was taxed at his estate level, with the funds ending up in the general estate for distribution.

They then liquidated the account and put it into equal accounts in each of our names. IIRC it was some form of annuity rather than simple stocks and bonds. Some decided to take the tax hit and cash it all in, some of us chose to roll it over to an inherited IRA, but we all got to do it in our own time. I have been taking RMDs based on my age since then. RMDs are required for inherited IRAs.

One thing that kind of freaks me out is that the IRA is still titled in Dad's name. The brokerage was even sending Dad mail here at my address, until I told them to stop. Our mailman was having fits over it, with the name being different from mine.

Since you've already dealt with the RMD for this year, you should be able to ignore this for a while. I don't believe there is an end of year time crunch, as there was for us with one of the RMDs not yet taken.

Hugs and best wishes,

IP
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Our mailman was having fits over it, with the name being different from mine.

Your mailman needs to get his nose out of your business.

I had my father's mail forwarded to my address. I understand that it is distressing to still receive mail in your father's name.
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Our mailman was having fits over it, with the name being different from mine.
...
Your mailman needs to get his nose out of your business.


Eh. He's a little OCD about getting everything JUST right, so a different surname without the in care of label was giving him angst. Best mailman we've ever had.

I also found it very confusing that the account was still in his name. I thought they had made a mistake, but it seems it will always be Dad's account and I just am the beneficiary of it.

IP
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I understand that it is distressing to still receive mail in your father's name.

Well, the good news is that you eventually reach the point where it's comical.

My father died in 2002. I still get mail for him. I used to get phone calls too, from the NRA and the RNC. The NRA finally gave up when I said "Golly, you people really mean it when you say 'cold dead hands,' don't you?"

The third time the Republicans called after I told them he was dead I went the burst into tears route, saying something along the line of "What kind of sick [child of questionable descent] are you that you get your kicks by torturing me with reminders of my dead father?" I then took to Twitter and Facebook lambasting them. So far, so good.

Phil
Rule Your Retirement Home Fool

P.S. As far as the inherited IRA is concerned, the title of it must include the name of the decedent.
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I also found it very confusing that the account was still in his name. I thought they had made a mistake, but it seems it will always be Dad's account and I just am the beneficiary of it.

Both of your names and the indication that it's an inherited IRA should be in the title.

Phil
Rule Your Retirement Home Fool
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The brokerage was even sending Dad mail here at my address, until I told them to stop. Our mailman was having fits over it, with the name being different from mine.

This is absurd, and your mailman needs to deal with it. At my house, we get mail for the 4 of us, even though DS moved out in June, but we also get mail for FIL (who has been deceased for 2 years) and DH's 2 aunts (who have both been deceased for longer than that), and only FIL has the same last name as us while the aunts have 2 different names. We also get mail for the investment club and the quilt guild because I am treasurer for both.

Once in a while, the letter carrier will put a question mark on the envelope, but as long as I'm not calling the Post Office or sending the mail back, they deliver it to the address on the envelope, and that is correct.

Your letter carrier has no vote in who gets mail at your address. He just needs to be delivering anything that has your address on it regardless of the name.
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He just needs to be delivering anything that has your address on it regardless of the name.

This is off topic for this board, but frankly I appreciate that our mailman uses his brain and takes pride in his work. We STILL get mail here from the previous owners, from whom we bought the house a decade ago, and I am not talking junk mail. The only time we have to deal with that is when our mail carrier is on vacation and someone else takes over. He drives packages and large amounts of mail right up to the door and even rings the bell to let me know it is there. Nice contrast to some FEDEX/UPS drivers who have simply dropped large expensive packages at the bottom of the driveway, or don't even bother to ring the bell after leaving a package in the evening which then was ruined by freezing temps.

He has bent over backwards to do a good job for this neighborhood, so yes, I am invested in keeping him happy. I realize in this day and age his behavior is unusual, but it is very welcomed in our neighborhood.

IP
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This is off topic for this board, but frankly I appreciate that our mailman uses his brain and takes pride in his work.

Understand. Idiosyncrasy in someone who is otherwise going beyond their job requirement is managed.

(I wasn't so forgiving about an engineer that snapped because I suggested he should do his job.)
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Thanks to everyone who responded to my post. I enjoyed the bits about the overzealous mailman.

My wife died at 2:30 AM this morning so her long ordeal is over.

brucedoe
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brucedoe: "My wife died at 2:30 AM this morning so her long ordeal is over."

Bruce: I am sorry for your loss.

Expected or unexpected, sudden or long ordeal, it is never easy to lose a loved one.

My condolences, JAFO
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Thanks to everyone who responded to my post. I enjoyed the bits about the overzealous mailman.

My wife died at 2:30 AM this morning so her long ordeal is over.

brucedoe


My sympathies are with you. Even though it has been a long ordeal, it must still be very difficult.
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Your letter carrier has no vote in who gets mail at your address. He just needs to be delivering anything that has your address on it regardless of the name.

It's not the letter carrier,there are USPS rules, she just has a stickler. Putting a list of people/organizations you are accepting mail for inside the box where the carrier can see it will usually solve most problems.

My Dad used to deliver in a neighborhood with lots of college students. He wouldn't deliver mail unless their names were on the mailboxes because students moved so often and didn't always bother with change of address forms.

You really want your personal and confidential info delivered to strangers because someone put the wrong address on an envelope?

Barbara
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(I wasn't so forgiving about an engineer that snapped because I suggested he should do his job.)

Heh. Sounds like you work where DH works.

IP
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You really want your personal and confidential info delivered to strangers because someone put the wrong address on an envelope?

Barbara


Here, noone puts their name on their mailbox.
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My wife died at 2:30 AM this morning so her long ordeal is over.

Wow. I lost my wife 9 years ago last month. She died after a 15 year battle with breast cancer. Life does go on, but I still miss her.

D.
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Dolon

Please accept my sympathies for you and your wife. After all, good memories are a type of heaven.

brucedoe
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