National Catholic Forester

Winter 2017 — www.ncsf.com 13 Failing to take RMDs from an LQKHULWHG,5$RUTXDOLŅHGSODQ ,I\RXLQKHULWDQ,5$RUTXDOL¿HGSODQDFFRXQW from someone other than your spouse, and you roll the funds into an "inherited IRA," you're generally required to begin taking RMDs by December 31 of the year following the year of the account owner's death. This rule applies regardless of whether you inherit a traditional or a Roth account. Failure to comply is subject to the same 50% penalty tax. [Described in #1 on the previous page.] Typically, you're permitted to stretch RMDs over \RXUOLIHH[SHFWDQF\PD[LPL]LQJWKHEHQH¿WVRI WD[GHIHUUDO4XDOL¿HGSODQVDUHUHTXLUHGWRDOORZ rollovers to a nonspouse's inherited IRA, except in certain limited circumstances. A common, but costly, mistake is to overlook the DFFRXQWRZQHU¶V¿QDOGLVWULEXWLRQ,IWKHDFFRXQW owner was required to take an RMD in the year of death, but died before withdrawing the full DPRXQW\RXDVEHQH¿FLDU\PXVWZLWKGUDZDQ\ remaining amounts by the end of the year. Titling an inherited IRA incorrectly 7RWDNHDGYDQWDJHRIWKHWD[GHIHUUDOEHQH¿WVRI DQLQKHULWHG,5$RUTXDOL¿HGSODQLW¶VFULWLFDO that the account be retitled properly upon the account owner's death (unless you inherit from your spouse and execute a spousal rollover). Suppose, for example, that John Doe names his GDXJKWHU-DQHDVEHQH¿FLDU\RIKLV,5$:KHQ John dies, the IRA must continue to be titled in John's name, using language such as "John Doe GHFHDVHG,5$IRUWKHEHQH¿WRI-DQH'RH´ If you retitle an inherited account improperly — "Jane Doe IRA," for example — it's possible that the IRS may treat the transaction as a taxable distribution of the entire account balance. Falling into the spousal rollover trap ,I\RXLQKHULWDQ,5$RUTXDOL¿HGSODQDFFRXQW from your spouse, you have an opportunity to UROORYHUWKHEHQH¿WVLQWR\RXURZQ,5$7KH 3 5 4 Look before you leap As you approach age 70½, or if you inherit DQ,5$RUTXDOLŅHGDFFRXQWFRQVXOW\RXU tax advisors before taking any action. They can help you understand your options and avoid unpleasant tax surprises. continued on page 14 IMAGE: DESIGNED BY YURLICK / FREEPIK

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