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Question for the Money Doctors

Question submitted on Nov 12, 2019.

Question

My Mother passed and has two retirement accounts. We are being told that the money in those accounts have to be placed in a Beneficiary IRA, or we have to pay 20% federal tax and 7% state tax.
My Mother was 70 years old, and wouldn’t have paid taxes if she had withdrawn that money. Why would we be taxed when we are listed as beneficiaries?

Answer

Please consult with a CPA/PFS (https://www.cpapowered.org/find-a-cpa) in your area who will help you work through the taxability and available options with respect to an inherited IRA by a non-spouse.

Generally the IRA beneficiaries may 1) Take a taxable lump sum distribution, 2) Convert the IRA to an inherited IRA and spread the taxable distribution over 5 years, or 3) Convert the IRA to an inherited IRA and take required taxable minimum distributions over beneficiary life expectancies.

Please note that some distributions need to begin no later than December 31 of the year after death.

I hope that this helps.


For additional information visit //www.360financialliteracy.org/

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