What distribution options does a non-spouse beneficiary have when inheriting an IRA following the death of a parent before the parent was taking his minimum age 70-1/2 distributions?
If the IRA owner died before his required beginning date (i.e., before April 1 following the year he would have reached age 70-1/2), the non-spouse beneficiary should keep the IRA in the name of the deceased parent (but continuing for the benefit of (“f/b/o” the child), and either (1) take distribution of all funds by the end of the fifth year following the year of the parent’s death, or (2) begin taking distributions the year after the year of the parent’s death, and take an amount each year based on the child’s remaining life expectancy. The second approach is usually better because it preserves the tax-free build-up in the IRA for a longer period.
Related Questions
- What distribution options does a non-spouse beneficiary have when inheriting an IRA following the death of a parent before the parent was taking his minimum age 70-1/2 distributions?
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