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Estate Planning Attorney Avon Lake Ohio Elder Law Joseph Motta Attorney

Joseph L. Motta Co.

Elder Law and Estate Planning Attorney

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Rules for Minimum Distribution of Inherited IRAs & Retirement Accounts

December 5, 2019December 12, 2019
Avoid Tax Penalties from Inherited IRA

Minimum Distribution of Retirement Plans: IRAs and 401(k)s

Congress created the rules governing the minimum distribution of retirement plan funds to encourage saving for retirement and to allow retirement assets to build up tax-free during the plan owner's working years. But lawmakers built in provisions so the money wouldn’t simply keep accumulating tax-free forever. The funds you withdraw are treated as taxable income in the year you take the distribution.

50% Tax Penalty for Not Withdrawing Minimum Amounts

Federal law requires that beginning on April 1 of the year after you reach age 70 1/2, you must begin withdrawing a minimum amount from your non-Roth individual retirement account (IRA) or 401(k) accounts. These withdrawals are called required minimum distributions (RMDs).  If you don’t start taking the RMDs from your retirement accounts and pay taxes on the withdrawals, you will face a 50 percent penalty on what should have been withdrawn but wasn’t.

Death Is No Excuse to Avoid RMDs

But what if you die after age 70 1/2 and before all the account funds have been distributed? In the eyes of the law, death is no excuse not to take RMDs from an IRA or 401(k). Your heirs must take the final RMD before they can take control of the account.

Rules for Inheriting an IRA

The rules for inheriting an IRA will depend on if the heir is a spouse or a non-spouse beneficiary, but regardless of who is inheriting the IRA, the heir must take the required minimum distribution (RMD) for the year the account owner died. The full RMD must be taken by December 31 in the year the account owner died, even if he or she died at the beginning of the year. To take the RMD, beneficiaries must contact the custodian of the account and submit a death certificate. If the account owner died before he or she was required to begin distributions, then the beneficiaries do not need to take an RMD.

The money from the RMD will go directly to the beneficiary listed on the account, not the estate. That means it will be taxable income for the beneficiary. If there is more than one beneficiary, it will be split evenly.

For more information about inheriting an IRA, click here.

Avoid Tax Penalties with Proper Estate Planning

At Joseph L. Motta, estate planning firm in Avon Lake, OH, we know how to help you avoid unnecessary tax penalties with proper estate planning and we truly enjoy putting to use our knowledge and expertise to provide you with the best advice. Call 440-930-2826 to schedule a free consultation.

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Estate Planning, Wills & Trustsbaby boomers, estate plan, estate planning attorney, retirement account beneficiary, retirement benefits beneficiary, RMD, taxes

Written by Joseph L. Motta

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Joseph L. Motta Co.

Estate Planning Attorney Avon Lake Ohio Elder Law Joseph Motta Attorney

Joseph L. Motta Co., LPA is your local estate planning attorney’s office. We are devoted to provide you with the peace of mind from knowing your affairs have been planned to avoid the disruptions that can accompany death or incapacity. From wills, trusts & power of attorney documents to long term planning and special needs planning, we use our expertise to provide you with the best advice on how to protect the ones you love.

Office in Avon Lake

(440) 930-2826
32730 Walker Rd. Suite J-1
Avon Lake, OH 44012
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  • 2020 Estate Planning Guide
  • 2020 Ohio Medicaid Guide
  • Special Needs Trust Guide from Your Special Needs Planning Attorney
  • Understanding Probate
  • Benefits of a Living Trust
  • Guides: Long-Term Care, Medicaid, Special Needs Planning
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Joseph L. Motta Co.

  • Home
  • About
    • Avon Lake Spotlight Video
    • Back
  • Events
  • Our Practice Areas
    • Estate Planning Attorney
    • Long Term Care Planning
    • Special Needs Planning Attorney
    • Medicaid Planning
      • Medicaid Eligibility: Spouse’s Income and Benefits
      • Medicaid: Community Spouse Resource Allowance (CSRA)
      • Back
    • Back
  • Resources
    • Blog Posts
    • Senior Scam Info
    • Client Forms
      • Estate Planning for Married Couple
      • Estate Planning for Single Person
      • Long-Term Care Client Questionnaire
      • Probate Worksheet
      • Back
    • Helpful Guides
      • Estate Planning Guide
        • Understanding Probate
        • Preparing a Will
        • Benefits of a Living Trust
        • Back
      • 2022 Ohio Medicaid Guide
      • Special Needs Trust Guide
      • Revocable Living Trust
      • Back
    • Back
  • Reviews
  • Contact

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