When you inherit an IRA, you have two options…
First, you can start taking distributions by December 31 of the year following the death of the original owner of the IRA. You may take those distributions for the rest of your life. For example, if your loved one passed in 2012, you have until December 31, 2013 to begin the distributions based on your life expectancy.
Secondly, if you don’t start taking the distributions by the end of that time frame, you have until the end of the fifth year to take all of the funds out of the plan. Again, if he or she dies in 2012, you have until December 31, 2017 to finish distributing the funds of the IRA.
Whichever method you opt for, be sure to follow the rules or you will face a 50% penalty if you fail to meet the required minimum distribution.
Have any questions about an IRA…contact a tax expert at the IRA Financial Group today.