Does an IRA Beneficiary Require a Death Certificate?
If you inherit an individual retirement account, you must send a certified copy of the originial owner's death certificate to the financial institution holding the IRA. To obtain a copy of the death certificate, contact the office of vital statistics in the locality where the decedent died. Although IRAs generally do not pass through probate because they are left to a designated beneficiary, the executor of the estate may be able to provide you with a death certificate.
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Besides the death certificate, the financial institution requires a notarized affidavit of your domicile and may need other forms. Unless you are the surviving spouse, you will need to make a trustee-to-trustee transfer for an inherited IRA naming you as the beneficiary. A spouse may choose to treat the inherited IRA as her own or roll it over into a personal qualified retirement account. She may continue to contribute money to the IRA. Non-spousal beneficiaries do not have these options.
Non-spousal Beneficiaries
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If you are not the surviving spouse, the Internal Revenue Service limits your options regarding the inherited IRA. Your choices depend on the age of the decedent. If you inherit a Roth IRA, you do not have the option of not taking distributions as is the case with a Roth IRA of the original account owner. Although the Roth IRA withdrawals are tax-free, you must take them based on your own life expectancy according to the IRS single life expectancy table. Traditional IRA distributions are taxed as ordinary income.
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Required Minimum Distributions
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If the decedent was over the age of 70 1/2, you must take required minimum distributions based on your life expectancy. Failure to take these distributions invokes an IRS penalty of 50 percent of the amount you should have taken but neglected to take.
Five-Year Rule
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If the decedent was under 70 1/2, you may use IRS five-year to take lump-sum distributions. These withdrawals are taxed as ordinary income. As long as the account is closed by Dec. 31 of the fifth year after the decedent's death, the IRS permits you to withdraw any amount of the assets within the five-year period without penalty.
Multiple Beneficiaries
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If the decedent named more than one IRA beneficiary, each person should include the death certificate when making the trustee-to-trustee transfer. Each beneficiary should set up his own inherited IRA for his percentage of the assets by the last day of the year following the decedent's death.
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