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Gerri A Harrison CFP EA
Gerri A Harrison CFP EA, Enrolled Agent
Category: Tax
Satisfied Customers: 252
Experience:  27 years of preparing income tax returns - both personal and small business
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My mother just died and left 3 IRAs to myself (retired, age

Customer Question

My mother just died and left 3 IRAs to myself (retired, age 63) and my brother (still working, age 58). How should we take these IRAs? I understand if we just take the money, we will owe taxes on the full amount at our individual tax rates; but I heard about something called and inherited (or benficiary) IRA that will allow us to use the inheritance just like our own IRA, taking RMWs over our life expectancy thus lowering taxes. My brother would start taking the RMW when he hits 59 1/2 and I would start now. Is most of this understanding correct?
Submitted: 3 years ago.
Category: Tax
Expert:  Gerri A Harrison CFP EA replied 3 years ago.

You are correct in much of what you say.

 

If you take the money now it is fully taxable although you would not be subject to any earlier distribution penalties even though your brother is under 59 1/2.

 

You can do inherited IRAs and spread that taxation out. However, since your mother was over 70 1/2 (I assume considering your age) and taking out RMDs you are required to take distributions out over her life expectancy, not yours. You only have the option over yours if she were not taking RMDs.

 

This decision must be made before the end of year and the IRA must be set up in that manner. If not, you lose the ability to do life expectancy and must instead liquidate it within 5 years.

 

You do also have the option, if it interests you at all to do a Roth conversion, pay the tax on it all now and then no RMDs are required.

 

Hope this helps. If you have any further questions, hit the need info button and ask. If you are satisfied with the answer please hit the green accept button to close out the question and allow me to receive payment.

 

 

Customer: replied 3 years ago.
Thanks Gerri,
But the IRS papers say:

Owner Died On or After Required Beginning Date

If the owner died on or after his or her required beginning date, and you are the designated beneficiary, you generally must base required minimum distributions for years after the year of the owner's death on the longer of:

  • Your single life expectancy as shown on Table I, or

  • The owner's life expectancy as determined under Death on or after required beginning date, under Beneficiary not an individual , later.

So this is different from your answer.

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