Don't wait to begin making withdrawals from inherited IRA

April 25, 2012

Inherited IRAs come with their own set of rules. Learn why you should start withdrawiing funds from the account soon after inheritance.

Q: My father passed away in 2002 and left me his individual retirement account (IRA). I have not made any withdrawals from it and was told recently that I should have. Is that true? What should I do?

Your next step should be to file Form 5329 with the Internal Revenue Service (IRS) for each year of withdrawal you missed, and request a waiver of the 50% excise tax. The IRS will waive the requirement only if you can prove that you missed those distributions due to reasonable error and that you are taking reasonable steps to fix it.

Answers to our readers' questions were provided by Medical Economics editorial consultant David J. Schiller, JD, Schiller Law Associates, Norristown, Pennsylvania. Send your money management questions to medec@advanstar.com Also engage at http://www.twitter.com/MedEconomics and http://www.facebook.com/MedicalEconomics.