When you inherit an IRA as a beneficiary, you cannot treat it as your own unless the decedent was your spouse. Otherwise, the Internal Revenue Service (IRS) requires that you start taking required minimum distributions (RMDs) from the account or pay penalties. The amount you have to withdraw each year depends on your age, the age of the decedent and the value of the IRA. If you prefer, instead of taking a minimum amount each year, you can also distribute the entire account within five years to avoid penalties.
1. Select the lower of the beneficiary's age or the decedent's age in the year the decedent died if the decedent died after beginning required distributions. If the decedent had not yet started required distributions, use the beneficiary's age. For example, if the decedent had started taking distributions and was 75 and the beneficiary is 80, use 75. However, if the decedent had not started taking required distributions and the decedent is 68 and the beneficiary is 28, use 28.
2. Look up the initial life expectancy for the account on the Single Life Table in IRS Publication 590 by finding the age in the left-hand column and the life expectancy in the right hand column. For example, if the age to use is 28, the initial life expectancy equals 55.3.
3. Subtract the number of years since the decedent's death from the life expectancy. In this example, if the decedent died three years ago, subtract 3 from 55.3 to find the life expectancy would be 52.3 years.
4. Divide the value of the IRA value as of December 31 of the prior year by the current life expectancy to find the RMD for the beneficiary. Completing the example, if the IRA's value equals $39,500, divide $39,500 by 52.3 to find the RMD equals $757.17.
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