What Are the Maximum IRA Beneficiary Withdrawals?
If you inherit an individual retirement account, or IRA, your financial gains will be offset by having to pay taxes on the money you take out of the account. Like the deceased owner, you will have to make minimum withdrawals each year, but there's no maximum limit on withdrawing from an inherited IRA. If you want to take the entire amount in a single year and pay the tax, you can do so.
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Withdrawal Requirements
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The Internal Revenue Service bases minimum withdrawals on life expectancy and provides online tables for account owners and beneficiaries to calculate theirs. If there's $50,000 in the IRA and the table shows you have 20 years to live, your minimum withdrawal for this year would be $2,500. You repeat the calculation every year to take into account any gains or losses in the account. You're free at any time to take out more than the minimum, but as long as there's money in the account next year, you'll have to make another minimum withdrawal.
Spouses
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A spouse who inherits an IRA has an option no other beneficiary does -- to treat the IRA as if it belonged to him. Other heirs will usually have to start immediate minimum withdrawals; a spouse can roll the inherited assets into his own IRA and keep it there until he turns 70 1/2, the age when mandatory minimum withdrawals begin. If he keeps the money in his wife's account, he doesn't have to withdraw money until she would have turned 70 1/2, "Forbes" magazine notes.
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Beneficiaries
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If the account owner died before turning 70 1/2, you can base your minimum withdrawals on your own life expectancy. If you're younger, with a better expectancy, that will work out to smaller withdrawals every year, though you can always take out more. If the owner died after the required-distribution date, you can use either your own life expectancy or the owner's life expectancy the year of his death. If you take the latter alternative, you reduce the expectancy by one every year that follows.
Considerations
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Another alternative for IRA beneficiaries is to withdraw the entire contents of the IRA within five years of inheriting it. If you do this, there's no minimum withdrawal requirement until year five, when you have to withdraw everything that's still in the IRA. If the beneficiary of the IRA is an estate or a trust and the owner was under 70 1/2, the account must be emptied within five years. If over 70 1/2, calculate minimum withdrawals based on the owner's life expectancy the year of her death.
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