Inherited IRA distribution help.


K

kastnna

If a non-spouse beneficiary inherits a traditional IRA prior to the
original owner reaching age 59 1/2 and the beneficiary chooses to take
a single lump sum distribution, will the 10% early withdrawal penalty
still apply?

Thanks
 
Ad

Advertisements

J

joetaxpayer

kastnna said:
If a non-spouse beneficiary inherits a traditional IRA prior to the
original owner reaching age 59 1/2 and the beneficiary chooses to take
a single lump sum distribution, will the 10% early withdrawal penalty
still apply?

Thanks

Nope.

No one thought I'd quit there, right? The beneficiary is subject to tax
at their marginal rate, i.e. regular tax rate. If this will put them in
the next bracket, they should consider taking distributions over a
couple years. They do have the option to stretch the withdrawals over
their lifetime, but your question implies they are choosing to take the
money as fast as they can. If it's a large sum, that would be a shame.

JOE
 
K

kastnna

Thanks Joe. I got a good hold on all of the 5 year, 1 year, and life
expectancy rules for inherited distributions for both pre and post RMD
situations, I just couldn't find anything on the early distribution
penalty.

The client is still very much alive and hopefully a lump sum will not
be necessary, he just wants to understand his options.

Thanks again
 
Ad

Advertisements

J

joetaxpayer

kastnna said:
Thanks Joe. I got a good hold on all of the 5 year, 1 year, and life
expectancy rules for inherited distributions for both pre and post RMD
situations, I just couldn't find anything on the early distribution
penalty.

The client is still very much alive and hopefully a lump sum will not
be necessary, he just wants to understand his options.

Thanks again

Okay, ten permit me to state the obvious (for other's benefit).
Start with the life expectancy rule by taking the first withdrawal in
time, and track the RMD. Each year, the beneficiary can always take out
more. Good luck to you.
JOE
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top