Inherited IRA

[oceanlovin'ea]

Client's mother died 12/26/05 and has a balance in her IRA of about $45,000. Client was beneficiary of the IRA.

Company that has IRA told her that she will have to take $3790.20 out when she transfers it to her name this year.

But according to page 13-24, she would not have to transfer it to her name. Choice 5 says she can leave it in deceased name and take RMD. or Choice 2 says she could elect to take the entire balance by the end of the fifth year and no distribution need to be made before the end of the fifth year.

Any one have any ideas why they are telling her she will have to take that amount out. She may not realize she doesn't have to transfer it out of her mother's name now.

Thanks for the help.

Linda F

[oceanlovin'ea]

Inherited IRA

Just wanted to put this back up at the top of the board so I might get some response to my question. Client willl be here on Friday.

Thanks

Linda F

[Bill Tubbs]

Beneficiary IRA

Linda,

Client should be able to roll the money into a Beneficiary IRA at whatever bank she wants to deal with.

You are correct -- she can either cash it all within 5 years, or start taking RMD. If she starts with a RMD for this year, she can then still decide to cash it entirely within 5 years. But if she doesn't take a RMD this year and doesn't cash it all within 5 years, I'm sure there would be some penalty due.

Bill

[Koss]

Distribution

Any one have any ideas why they are telling her she will have to take that amount out. She may not realize she doesn't have to transfer it out of her mother's name now.

The amount they are telling her to take out is probably the first RMD.

The "transfer" is simply a miscommuncation.

Apparently she can choose not to take the RMD, but making that choice seems to force the total distribution within five years. Taking the RMD is probably wiser because it leaves more options open.

Burton

[oceanlovin'ea]

Near retirement

This lady is near retirement age. Probably in the next 2 or 3 years she will retire. Then her income will be significantly less than now. I'm not sure if she will have a pension or only social security.

So we will have to look at the options tomorrow when she is here.

I do thank you all for your help.

Linda F

[Bill Tubbs]

Planning

This lady is near retirement age. Probably in the next 2 or 3 years she will retire. Then her income will be significantly less than now. I'm not sure if she will have a pension or only social security.

So we will have to look at the options tomorrow when she is here.

I do thank you all for your help.

Great planning opportunity! Keep in mind that more income may make more Soc Security taxable too. So, waiting until she draws SS may not be a good thing. Then again, maybe she'd defer getting SS for an extra year or two because of this other money. All depends what the dollar amounts are / will be.

And, you are quite welcome Linda.

Bill