Distribution Choices for an IRA Beneficiary
There are multiple and often complicated rules governing IRA distribution for beneficiaries. First of all, the distribution rules differ whether the IRA owner has died before age 701/2. Secondly, they differ depending on whether the beneficiary is a spouse or a non-spouse.
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Primary IRA Distribution Rules
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The IRA distribution rules hinge on whether the IRA owner died before or after the "required beginning date" of IRA distribution. The required beginning date is April 1 of the year in which the owner turned 701/2 years old, which is when he is required to take minimum distributions from the IRA.
Distribution Amounts
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The IRS calculates the minimum distribution amounts based on the beneficiary's life expectancy.
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The One-Year Rule and the Five-Year Rule
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If the IRA owner died before age 701/2, the beneficiary must follow either the one-year rule or the five-year rule for IRA distribution. The one-year rule states that the beneficiary must begin withdrawals in the year following the owner's death. If he follows the five-year rule, he must receive all the minimum distributions five years after the owner's death.
Distribution Choices for the Spouse Beneficiary
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If you are the IRA owner's spouse and were named beneficiary, you can treat the inherited IRA as your own IRA. This means you can roll the IRA into your own IRA, or you can name another beneficiary to the inherited IRA.
Distribution Choices for the Non-Spouse Beneficiary
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A non-spouse beneficiary can choose whether to disclaim some or all of the inherited IRA, or he can transfer the IRA to an IRA Beneficiary Distribution Account. If transferred, the beneficiary must take the required minimum distribution amounts by December 31 of the year after the owner's death.
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