Ask the Expert: How must I take distribution from inherited IRA?
My sibling died in 2021 at the age of 58. My sister and I inherited his IRAs, which are now in our inherited IRAs. We were 63 and 65 years old when he died. We've received different advice regarding distribution of these inherited accounts. My sister was advised to take annual required minimum distributions starting in 2022. My adviser said I have 10 years to take the entire amount, any way I chose. Who is correct?
Her adviser is right. Most retirement account beneficiaries now must empty their inherited accounts within 10 years, but you and your sister qualify for an exception to the 10-year rule. You must take RMDs from your inherited accounts — and you can stretch them over your life expectancies.
If you’re now 65 years old, for example, the Internal Revenue's Single Life Expectancy actuarial table gives you a 22.9 year life expectancy. If the 2023 year-end balance in your inherited account is $50,000, your 2024 RMD will be $50,000 divided by 22.9: $2,183.40.
Why do you get to stretch distributions over your lifetimes?
The law exempts five categories of beneficiary from the 10-year payout requirement: surviving spouses; the deceased account owner’s minor children (but not grandchildren) until they reach majority; disabled individuals; chronically ill individuals; and beneficiaries who aren’t more than 10 years younger than the original account owner.
Siblings and friends of the deceased often fall into that last category. You and your sister do, too, says Ed Slott, a Rockville Centre tax accountant. You were older than your deceased sibling. He died at 58 when you were 63 and 65 years old. "If you're older, by definition you're not younger," says Slott.
The bottom line
It pays to read the fine print of the IRA distributions rules.
