How to Take Cash as an IRA Beneficiary
Traditional individual retirement accounts (IRAs) allow you to defer your tax payments on income by contributing tax-deductible amounts to an investment account. The deductible amount of your contribution provides a tax savings. When a loved one has made contributions to an IRA and invested for his lifetime, he may intend to use this money during retirement. However, if he dies and you're the beneficiary, you get this money. You'll have to know the method for obtaining this money, because the IRS requires that it be distributed a certain way after the original account owner's death.
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Instructions
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Gather all IRA information. You need the account number of the IRA. It also may be helpful to have the most recent statement to check against the IRA custodian's most recent record of funds in the account.
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Verify your distribution requirements. If you're the spouse of the deceased, you may elect to treat the IRA as your own. If you do, you simply retitle the IRA by including your name on the account. You may contribute to the account and make withdrawals as you would your own. You also may roll the money over to an IRA you own. If you're not the spouse of the deceased, you will retitle the account but take distributions from it immediately.
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Fill out and submit a distribution form, when necessary, to your deceased relative's IRA custodian. If you're the spouse of the deceased, no distributions are necessary until you reach age 70 1/2. If you're not the spouse, you must take distributions immediately from the account. Distributions commence within one year following the death of the original account owner. You may take a lump sum, payments over five years, or payments stretching out over your entire life.
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Tips & Warnings
When filling out the distribution form for the IRA, the deceased's financial institution will help you fill out the form and take the correct distribution amount. Non-spousal lifetime distributions must be consistent with Table I in the appendix of IRS publication 590.
References
- IRS.gov: Publication 590
- "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
