Tuesday, October 16, 2012
As I have previously discussed, a non-spouse beneficiary that inherits an IRA or a Roth IRA must begin to take distribution within a year after the owner's death. There are rules that apply to this type of situation. A beneficiary must establish an inherited account by the end of the year that the owner of IRA died. Typically, the deadline is on December 31st of that year. It is also the deadline for when a beneficiary must take his or her first required mandatory distribution. If a person misses one of these required distributions, then the distribution returns to the default option under the IRA account agreement.
If a beneficiary wants to calculate his or her required distribution amount, then that person might want to consider taking the following steps. First, the beneficiary might want to consider finding their life expectancy factor, which can be found in IRS Publication 590. Once the beneficiary has obtained that, the person then needs to find the prior year-end account balance, which is usually based on the previous year's account balance. The beneficiary would need to "divide the account balance by your life expectancy factor to get the amount of your RMD for the year." In each subsequent year, the beneficiary would need to reduce his or her life expectancy number.
See Beverly DeVeny & Jared Trexler, What Happens When A Beneficiary Does Not Take RMDs?, The Slott Report, Oct. 12, 2012.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.