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RMD rules for inherited IRAs

The IRA you're inheriting comes with a few responsibilities. Here's a rundown of what you need to know.

What's an RMD?

The IRS requires that most owners of IRAs withdraw part of their tax-deferred savings each year, starting at age 70½ (or after inheriting an account). That withdrawal is known as a required minimum distribution (RMD). If you withdraw less than your RMD, you may owe a 50% penalty tax on the difference.

RMDs are designed to ensure that investments in IRAs don't grow tax-deferred forever. The rules for when IRA beneficiaries must take RMDs depend in part on the account owner's age on the date of his or her death.

The account owner's required beginning date (RBD)

IRA owners generally must take their first RMD by April 1 of the year after they reach age 70½; that date is called their required beginning date (RBD).

RMD calculation methods

The 2 methods to calculate your RMD—that is, how much you must withdraw—are the life-expectancy and 5-year methods. Qualified trust beneficiaries follow unique distribution rules, which are explained below.

Life-expectancy method

The life-expectancy method requires that you withdraw certain amounts from the IRA each year according to IRS calculations. You can withdraw more than the RMD if you wish.

5-year method

The 5-year method requires that you receive the entire balance of the account by the end of the fifth year after the year of your spouse's death.

You may make withdrawals at any time, as long as you redeem the entire account balance by the end of that fifth year. The 5-year method doesn't apply if the account owner dies on or after his or her required beginning date.

Roth IRAs & RMDs

Roth IRA owners don't need to take RMDs during their lifetimes, but beneficiaries who inherit Roth IRAs must take RMDs.

If you're inheriting a Roth IRA, calculate your RMDs as though the account owner had died before his or her RBD, regardless of the actual date of death.

Calculating RMDs

The IRA owner died before his or her required beginning date (RBD)

 

Spouse, if the spouse is the IRA's only beneficiary

If you assume the IRA, RMD calculations are based on your RBD.

If you inherit the IRA, you have 2 options:

1. Life-expectancy method. You must begin taking RMDs based on your own life expectancy by the later of:

  • December 31 of the year after the year of the IRA owner's death.
  • December 31 of the year in which the IRA owner would've turned 70½.

2. 5-year method. You must redeem the entire account by by the end of the fifth of the year after the year of the IRA owner's death.

Qualified beneficiaries

If you inherit the IRA, you have 2 options:

1. Life-expectancy method. You must begin taking RMDs by December 31 of the year after the IRA owner's death, based on:

  • Your life expectancy beginning with the age you reach in the year after the IRA owner's death, if all beneficiaries have established their own accounts by December 31 of the year after the year of the IRA owner's death.
  • The life expectancy of the oldest beneficiary if not all of the beneficiaries have established their own accounts by December 31 of the year after the year of the IRA owner's death.

2. 5-year method. You must redeem the entire account by by the end of the fifth year after the year of the IRA owner's death.

Nonqualified beneficiaries

If you inherit the IRA:

5-year method. You must redeem the entire account by the end of the fifth year after the year of the IRA owner's death.

The IRA owner died on or after his or her required beginning date (RBD)

 

Spouse, if the spouse is the IRA's only beneficiary

If you assume the IRA, RMD calculations are based on your RBD.

If you inherit the IRA, you must begin taking RMDs by December 31 of the year after the year of the IRA owner's death, based on the longer of:

  • Your life expectancy (recalculated each year), or
  • The IRA owner's remaining life expectancy.

You must take an RMD for the year of the IRA owner's death if the owner hasn't already taken one for that year.

Qualified beneficiaries

If you inherit the IRA, you must begin taking RMDs by December 31 of the year after the year of the IRA owner's death, based on the longer of:

  • Your life expectancy expectancy, or
  • The IRA owner's remaining life expectancy.

You must take an RMD for the year of the IRA owner's death if the owner hasn't already taken one for that year.

Nonqualified beneficiaries

You must begin taking RMDs by December 31 of the year after the year of the IRA owner's death based on the the IRA owner's remaining life expectancy.

You must take an RMD for the year of the IRA owner's death if the owner hasn't already taken one for that year.

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Your questions answered

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Inheritance glossary

Being familiar with these terms might help as you transfer your loved one's account into your name.

REFERENCE CONTENT

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Required beginning date

April 1 of the year after the year in which the original IRA owner reaches age 70½, generally the date by which the first required minimum distribution (RMD) must be taken.

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Required beginning date

April 1 of the year after the year in which the original IRA owner reaches age 70½, generally the date by which the first required minimum distribution (RMD) must be taken.

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Qualified beneficiaries

A beneficiary who has neither received a lump-sum payment nor disclaimed the IRA before September 30 of the year after the year of the IRA owner's death. Qualified beneficiaries include a spouse who isn't the IRA's only beneficiary; nonspouse beneficiaries; and qualifying trusts. Trusts must meet all of the following conditions to be considered qualifying:

  • The trust must be irrevocable or become irrevocable upon the IRA owner's death.
  • The trust must be valid under state law.
  • Beneficiaries are identifiable in the trust document.
  • The custodian must be provided a copy of the trust document or a list of the trust's beneficiaries and conditions by October 31 of the year after the year of the IRA owner's death.
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Nonqualified beneficiaries

Beneficiaries that aren't people, such as charities or organizations; the IRA owner's estate; or nonqualifying trusts.

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Required beginning date (RBD)

April 1 of the year after the year in which the original IRA owner reaches age 70½, generally the date by which the first required minimum distribution (RMD) must be taken.

Layer opened.

Qualified beneficiaries

A beneficiary who has neither received a lump-sum payment nor disclaimed the IRA before September 30 of the year after the year of the IRA owner's death. Qualified beneficiaries include a spouse who isn't the IRA's only beneficiary; nonspouse beneficiaries; and qualifying trusts. Trusts must meet all of the following conditions to be considered qualifying:

  • The trust must be irrevocable or become irrevocable upon the IRA owner's death.
  • The trust must be valid under state law.
  • Beneficiaries are identifiable in the trust document.
  • The custodian must be provided a copy of the trust document or a list of the trust's beneficiaries and conditions by October 31 of the year after the year of the IRA owner's death.
Layer opened.

Nonqualified beneficiaries

Beneficiaries that aren't people, such as charities or organizations; the IRA owner's estate; or nonqualifying trusts.