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Question for the Money Doctors

Question submitted on Aug 8, 2014.


Hi, My mom died at age 84 in July 2014. She had an IRA account for which she designated her 4 children(ages 54, 53, 52 and 50) as equal beneficiaries. She had inherited this account in 1984 upon the death of her spouse and made no contributions to it ever. She had taken all of the RMD's since reaching age 70 1/2 (I'm not sure if she had taken any withdrawls in 2014). As beneficiaries, what are our options here? Thanks


As beneficiaries of an inherited IRA, you and your siblings have three options:

1) You can split your mother’s IRA into separate accounts for each beneficiary by December 31 in the year following the original owner’s death into an "Inherited IRA" account or

2) Transfer all assets into an "Inherited IRA" account held in the name of the original owner or

3) Liquidate the inherited IRA and distribute the assets amongst the beneficiaries.

Since your mother was over 70 ½ at death, you and your siblings will be required to take a minimum amount of money, called a "Required Minimum Distribution" (RMD) from the account by December 31 every year for life if you choose either option 1 or 2 above. The RMD starts in the year following the original owner’s death and is based on the beneficiary’s age. If the account is not separated, the RMD will be based on the oldest beneficiary’s age.

It would be wise for you and your siblings to consult a professional such as a CPA/PFS ( before determining which option to take. A CPA/PFS (Personal Financial Specialist) will be able to advise you on both the investment component and the tax component of your inheritance. Keep in mind that all money distributed from the IRA is subject to income tax. Your decision will be dependent on what the cash flow needs are for each beneficiary as well as their individual tax brackets.

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