My two brothers and I inherited a traditional IRA from my mother after she died last year. When do we have to start taking distributions, and how will the money be taxed? -- T.M., Charlotte, N.C.
If your mother had already started taking required minimum distributions from her IRA, you must begin taking RMDs by December 31 of the year after she died based on the life expectancy of you and your brothers. If she hadn’t started taking RMDs, you must either start taking minimum withdrawals by December 31 of the year after she died or withdraw all of the money within five years. You can take the money without having to pay a 10% early-withdrawal penalty, but you will have to pay income taxes on distributions, except for any portion based on nondeductible contributions.
Separate each brother’s share of the IRA into an inherited IRA in his own name so that each of you can take withdrawals based on your own life expectancy. Use Life Expectancy Table 1 in IRS Publication 590-B.
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