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March/April 2018
Complications Ahead: Non-Spousal IRAs
When you inherit an IRA from a spouse, the rules for transfer are relatively cut-and-dried. When you inherit an IRA from a spouse, required minimum distributions (RMDs) must begin by April 1 of the year after you reach age 70. If, however, you inherit an IRA from someone who wasn’t your spouse, you will likely face additional complications.
RMD Rules
One allowable way to take distributions from a non-spousal IRA is by emptying the entire account within five years of the owner’s death. The other distribution method you can use is to base distributions on your life expectancy, not the owner’s.
More Time
For many people, this method can mean spreading out distributions over time, especially if the person inheriting the IRA is at least one generation younger. Another benefit: you have up to a year after the IRA owner’s death to begin RMDs with this option.
How to Figure RMDs
If you choose to base RMDs on your life expectancy, divide the expected number of years left in your life, as determined by the IRS’s uniform lifetime tables, into the account balance. The longer you have, the more time your inherited IRA can potentially grow tax-deferred.
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