A Break in '09 for Withdrawals From Inherited IRAs

I inherited an IRA from my mother. As required, I have taken a mandatory withdrawal every year since then. Can I benefit from the law that suspends required minimum distributions for 2009?

Yes. IRA owners who must take required minimum distributions from their accounts every year after they reach age 70½ get a break in 2009, and people who have inherited IRAs don't need to take required minimum distributions this year, either. Beneficiaries who are taking minimum distributions throughout their own life expectancy can skip their withdrawal for 2009, and heirs who are currently taking mandatory distributions for five years now get six years to take out the money.

If you're receiving automatic payouts of your minimum distributions but don't need the money now, ask your plan administrator how to temporarily suspend the distributions. Most major mutual fund companies and brokerage firms are continuing to make regular IRA payouts to people who have been receiving automatic withdrawals, unless they hear otherwise.

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Generally, IRA owners who receive RMDs that they don't need this year have 60 days to roll the money back into the account without having to pay taxes on the distribution. But that isn't an option for inherited IRAs owned by non-spouse beneficiaries, says Ed Slott, editor of Ed Slott's Ira Advisor newsletter. If you don't want the money this year, you'll need to contact the administrator to stop the checks from coming.

The minimum-distribution requirement resumes in 2010. Ask your IRA administrator whether you'll need to take any special steps to start receiving regular withdrawals next year. For example, if you asked T. Rowe Price to suspend your automatic withdrawals just for 2009, the payouts will resume next year. But if you turned off the automatic-payout function entirely, you may need to contact the company to start them again.

For more information about RMDs, see Wise Moves in a Year With No RMDs.