IRA Withdrawals

Can I do a Qualified Charitable Distribution from my IRA?

Charitable contributions are a common financial goal.  One of the easiest and most tax efficient ways to do this is to do a Qualified Charitable Distribution (QCD) from your IRA.  In order to do this, you must meet specific requirements which include age, dollar amount, and the type of charities you can contribute to.  Read below to see if you qualify for making a Qualified Charitable Distribution from your IRA.

Do you have a traditional IRA, inherited IRA, inherited Roth IRA, SEP IRA, or SIMPLE IRA that is subject to an RMD?

If you do not have a required RMD, you will not be eligible for a QCD.  If you do have to take an RMD from any of the IRA types listed above, move on.

Are you at least 70.5 at the time you plan to make the Qualified Charitable Distribution?

Those under 70.5 will not be eligible to make a QCD.  This means even if you have an inherited IRA subject to RMDs, the QCD may not be available to you.  If you are over age 70.5, move on.

Is the IRA actively receiving any employer contributions (SEP IRA or SIMPLE IRA)?

If you answered “yes”, you unfortunately will not be eligible for the QCD.  If you are not still receiving employer contributions, move on.

Is the recipient a private foundation or donor-advised fund?

Qualified Charitable Distributions can not be done through a private foundation or donor-advised fund.  If your intended charity is not private or donor-advised, then you will be able to make a QCD.  The amount of the QCD cannot be greater than $100,000 per year ($200,000 for married couples).

Qualified Charitable Distributions have to be done correctly, else they can have large tax consequences.  Check out this flowchart to learn more.

If you have questions regarding Qualified Charitable Distributions or other general retirement planning advice, please give us a call at 303-440-2906 or click here to schedule a time to speak with us.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Can I Delay the RMD from the Traditional IRA I Inherited?

Traditional IRAs allow the owner several tax advantages: it allows for an upfront tax deduction as well as tax-deferred growth.  Upon withdrawal of funds, the account owner is taxed at ordinary income rates. Inherited IRAs require the new account owner to begin taking withdrawals over their lifetime regardless whether or not they need the funds.  Why?  Because Uncle Sam wants to collect his share.  Here are some potential strategies for delaying RMDs from Traditional IRAs as long as possible.

Are you the beneficiary of a Traditional IRA from someone other than your spouse?

If you inherited a Traditional IRA from a spouse, you are likely able to delay taking RMDs until you reach 70.5 years of age.  Check out our “Should I Inherit my Deceased Spouse’s IRA?” flowchartIf you inherited the IRA from a non-spouse, move on to the next question.

Did the person pass away before their Required Beginning Date (April 1st, the year after turning 70.5)?

They have reached their Required Beginning Date

This allows you two options: electing the “5 Year Distribution Rule” or taking RMDs based on your life expectancy using the IRS Single Life Expectancy Table.  The “5 Year Distribution Rule” means all assets must be out of the account at the end of 5 years.  You could withdraw all funds immediately, spread them out over the 5 years, or take them all out just before the end of 5 years.  Keep in mind you will need to pay ordinary income tax on the whole amount distributed. 

If you take RMDs based on your life expectancy it will spread out the tax burden.

They have not reached their Required Beginning Date

You will be required to open an Inherited IRA and take RMDs based on your life expectancy according to the IRS Single Life Expectancy Table.  Depending if the deceased had satisfied their RMD for the year of their death, you may be required to take one this year.

If you’ve made it this far, you may be able to delay the RMD from your inherited IRA.  Check out this flowchart to learn more.

If you would like to schedule a call to talk about the best strategy for delaying RMDs from Inherited IRAs, give us a call at 303-440-2906 or click here to schedule a time to speak with us.

 

 

 Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

 

 

Should I Inherited My Deceased Spouse’s IRA?

When a spouse is the beneficiary of the IRA of their deceased spouse’s IRA, there are several options available. Each option has its own advantages, depending on the needs of the surviving spouse.  Read below to see which option benefits you best.

Are you the sole beneficiary to your spouse’s Traditional IRA?

If you are not the sole beneficiary, your situation is a bit more complicated.  Check out our “Can I Delay the RMD from the Traditional IRA I Inherited?” flowchart here If you are the sole beneficiary, move on to the next question.

What best describes your situation:

You plan to use all the assets in five years

Consider electing the 5 year rule if you expect significant expenses over the next five years that will deplete the account.  This allows you to take distributions at any time over the next five years of any amount, provided the account is depleted at the end of five years.  Keep in mind you will need to pay ordinary income tax on all distributions in the year they are taken.

You want income and are younger than 59.5 years old

Consider inheriting the IRA, which will allow you to take distributions from the IRA penalty-free.  You will be required to take RMDs based on the IRS Single Life Expectancy table.  Of course, you can take any amount of distributions that you need as long as the distribution is greater than or equal to the RMD.

You don’t want income and/or are younger than your deceased spouse

Consider rolling over the IRA into your own IRA.  This will allow you to avoid taking RMDs until the year after you turn 70.5.  If needed, you can take distributions as soon as you hit 59.5.

 

There are a lot of factors to consider when deciding which option is best for you.  Check out this flowchart to learn more.

If you would like to schedule a call to talk about the best strategy for an IRA you have inherited, give us a call at 303-440-2906 or click here to schedule a time to speak with us.

 

 Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

 

What to Do After Inheriting an IRA

Here is a nice article provided by Kimberly Lankford of Kiplinger:

 

By Kimberly Lankford, Contributing Editor   

 

September 1, 2017

 

Heirs must begin taking withdrawals once they inherit an IRA, but how they choose to make those distributions can have a big impact on their account balance over time. 

 

Q. My mother just passed away at the age of 60. She has $110,000 in a traditional IRA, and my sister and I are the beneficiaries. The bank said it will have to open an IRA account for each of us and then distribute the $110,000 equally between us. Do we need to keep the money with that bank or can we transfer it to another brokerage firm? Also, when do we need to withdraw the money? I'm 39 years old.

 

A. Because you and your sister are non-spouse beneficiaries, the bank will open inherited IRAs for each of you and transfer the money directly into the two accounts (the options are different for spouses who are beneficiaries and can roll the money into their own IRAs). You can keep the IRA at that bank or transfer it to a different IRA custodian, such as a brokerage firm or mutual fund company. Money from an inherited IRA must be directly transferred from the old account to the new one, so check with the new administrator to find out what steps you need to take to do this. "The new IRA custodian must be willing to accept inherited IRAs," says Christine Russell, senior manager of retirement at TD Ameritrade. You may also have to complete special paperwork for the transfer.

 

As a non-spouse beneficiary, you have two options for taking the money: You can withdraw all the funds from the inherited IRA within five years, or you can start taking periodic payments by December 31 of the year following the year of your mother's death.

 

Given that you are only 39, you're probably better off taking periodic payments. That's because your required withdrawals will be smaller under this method, so you'll have more money left in the account to grow tax-deferred for years. 

 

The periodic payments for inherited IRAs are similar to required minimum distributions for IRA holders over age 70½, but they use a different life-expectancy table to calculate the annual withdrawals (Table 1 single life-expectancy table, in Appendix B of IRS Publication 590-B, Individual Retirement Arrangements).

 

Make sure the IRA custodian knows you want the periodic payment option. Otherwise, its IRA documents may require you to withdraw the money within five years, says Russell.

 

Whatever option you choose for withdrawals, the distributions will be taxable, except for any from nondeductible contributions. With an inherited IRA, though, you won't have a 10% penalty for early withdrawals before age 59½.

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.