Dear Liz: I inherited my father’s IRA through a trust in 2010. Unbeknownst to me at the time, I’ve now found out I should have taken that money out over the following years, but I didn’t.
I turned 73 in May of this year, and I’d like advice on what I should do with that account.
Answer: Get thee to a tax pro. You’ve got some distributions to make, taxes to pay and penalties to mitigate.
Today’s rules for inherited IRAs require most non-spouse beneficiaries to empty the accounts within 10 years, thanks to the SECURE Act of 2019.
Before that, most beneficiaries could spread required minimum distributions over their own lifetimes.
Depending on the type of trust, you might have been required to take RMDs at the same pace your father was taking them. But either way, distributions were supposed to be made.
You (or better yet, your tax pro) will need to reconstruct the distributions that should have been taken since 2010, says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.
Those distributions should be made as soon as possible, and then you (or better yet, your tax pro) can ask for relief from the possible 25% excise tax penalty that would otherwise be owed on the distributions you missed.
Your tax pro will need a copy of the trust, your dad’s date of death and the IRA’s Dec. 31 balances for every year since then.
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