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MRD Rules for Inherited IRAs

If you’ve inherited an IRA, learn about the minimum required distributions (MRDs) you may need to take soon, as well as how MRDs work in the long run.

Which rules governing MRDs apply to you depend on your relationship to the deceased original owner. The relationships fall into three categories:

  • Spouse inheritors
  • Non-spouse inheritors, such as son, daughter, brother, sister, or friend of the original owner
  • Entity inheritors, such as a trust, estate, or non-profit organization

Review the guidelines below “For All Inherited IRA Owners,” and then review the tab that applies to you specifically.

When to begin MRDs

MRD rules dictate not only how much, at a minimum, you are required to withdraw from an IRA, but when you must begin taking those distributions, as well. Generally, you must begin taking MRDs for Inherited IRA assets by December 31 of the year after the year of the original owner’s death. Our Retirement Distribution Center can help you calculate and manage your required withdrawals. Learn more about our Retirement Distribution Center.

Automate your withdrawals

One of the easiest ways to ensure you're meeting your MRD is to take advantage of your Fidelity IRA’s automatic withdrawal service. If you choose this option, based on the information you provide, Fidelity will:

  • Automatically calculate the MRD you need to withdraw from your Inherited IRA assets each year.
  • Direct those distributions to you, your bank account, or into a Fidelity nonretirement account that you specify.
  • Notify you annually each January of your MRD amount and schedule for the year.

Enroll online.

Enroll by mail using the Automatic Withdrawals - Inherited IRAs (PDF).

Penalty for missing MRDs

If you don't take the required minimum distributions from your account, you will be subject to a penalty equal to 50% of the amount that should have been withdrawn.

Inheriting a Roth IRA

If you inherit a Roth IRA and transfer the assets to an Inherited Roth IRA, unlike the original owner, you must take MRDs. As long as the assets have been in the Roth IRA for five or more years, these MRDs can be withdrawn federally tax-free.

The five-year rule

If the original account owner died prior to age 70½, you may choose to elect to use the five-year rule. Generally, this rule applies if the original owner died before April 1 of the year following the year the original owner would have turned age 70½. If you take advantage of this rule, you do not have to begin taking MRDs in the year following the year of the original owner’s death.

Under the five-year rule:

  • You can withdraw from your inherited IRA assets at any time, in any amount.
  • You must withdraw all assets by December 31 of the fifth anniversary year following the IRA owner's death.

As long as the account is depleted within this timeframe, the MRD penalties can generally be avoided.

Example:
Year of death: 2011
Fifth year after the year of death: 2016
Deadline for depleting the account: December 31, 2016

However, under the five-year rule, assets you withdraw will be included in your ordinary income and are taxable as such. This may impact your taxes significantly. Talk to a tax advisor if you plan to use this option.

Please note that the information provided by Fidelity Investments is general in nature and should not be considered investment, legal or tax advice. Fidelity does not provide investment, legal, or tax advice. Consult with a legal or tax professional regarding your unique tax situations.

Next steps

Open an Inherited IRA.
Or call an inheritance specialist at 800-544-0003 to take the first step for your Inherited IRA.

Enroll in Automatic Withdrawal Service.
If you have a Fidelity Inherited IRA, simplify MRDs by using the Automatic Withdrawal Service.

Retirement Distribution Center
See how our Retirement Distribution Center can help you calculate and manage your minimum required distributions for your Fidelity IRAs (Traditional IRAs, SEP IRAs, SIMPLE IRAs, Rollover IRAs, and all small-business retirement plans).

When you inherit an IRA from your spouse, you have a choice to make that other inheritors don’t: you can roll over the assets into your own IRA. You can also transfer the assets into an Inherited IRA, as all other beneficiaries can. Depending on which option you choose, different MRD rules apply.

Option 1: Roll the inherited assets into your own IRA

If you choose to roll over the assets into your own IRA, you would base the timing and calculation on your own age using the IRS Uniform Life Expectancy Table (PDF).

The table assumes that distributions would extend over two lives: yours and a beneficiary 10 years younger than you. With this option, your MRD would be lower than if you transferred your assets to an Inherited IRA.

Choosing this option can be advantageous if:

  • You have not yet reached age 70½ but your spouse had. It enables you to stretch out the tax-deferral of IRA assets by delaying distributions until you reach age 70½.
  • You are over age 59½ and you may want to take distributions. Distributions from your IRA would not be subject to the 10% early withdrawal penalty.

Conversely, rolling the assets to your own IRA may not be advantageous if:

  • You are under age 59½, and you intend to take a distribution from your IRA. You will be subject to the 10% early withdrawal penalty in your IRA but would not be subject to this penalty on an Inherited IRA.

Option 2: Transfer the assets to an Inherited IRA

If you choose to transfer the assets to an Inherited IRA, the amount of your MRDs will be based on your age and be recalculated each year based on the factors in the IRS Single Life Expectancy Table. A benefit of this option is that distributions from an Inherited IRA, no matter what your age, are not subject to the 10% early withdrawal penalty.

The timing of the initial distribution may be based on your spouse’s age at the time of his/her death. If your spouse was:

  • Older than age 70½, you must begin taking MRDs by December 31 of the year following your spouse's death.
    View an example.
  • Younger than 70½, you may be able to delay MRDs until your spouse would have turned 70½.
    View an example.

Transferring your assets to an Inherited IRA may be advantageous if you are:

  • Older than your spouse and your spouse died before age 70½, since this option would allow you to delay taking the MRDs until the year your spouse would have turned age 70½.
  • Younger than age 59½ and you need access to these assets immediately, since you would not be subject to a 10% early withdrawal penalty.

If you’d like to convert to Roth IRA

Whether you move the inherited assets to your existing IRA or open a new IRA, you have the option of converting to a Roth IRA. Be aware, however, that when converting to Roth, you will have to pay any taxes due at the time you convert.

Consult an inheritor services specialist at 800-544-0003 for more information if you are interested in converting an Inherited IRA to a Roth IRA.

If you wish to make immediate withdrawals

When you move the inherited assets to your own account may make a difference if you need immediate cash.

If you need some of the assets right away and you are under age 59½, you may want to put some or all of the assets into an Inherited IRA immediately. Since distributions from that account will not have a 10% early withdrawal penalty that would apply to your own IRA, this option may be a good one if you need that immediate access to cash.

However, if you do not need those assets immediately or you are over age 59½, putting those assets into your own IRA might make the most sense. Since you are over age 59½, there will not be early withdrawal penalties.

Next steps

Open an Inherited IRA.
Or call an inheritance specialist at 800-544-0003 to take the first step for your Inherited IRA.

Enroll in Automatic Withdrawal Service.
If you have a Fidelity Inherited IRA, simplify MRDs by using the Automatic Withdrawal Service.

Retirement Distribution Center
See how our Retirement Distribution Center can help you calculate and manage your minimum required distributions for your Fidelity IRAs (Traditional IRAs, SEP IRAs, SIMPLE IRAs, Rollover IRAs, and all small-business retirement plans).

Generally, the IRS requires non-spouse beneficiaries to begin taking MRDs from the inherited assets beginning in the year after the year of death of the original owner. The first MRD must be taken from the newly established Inherited IRA by December 31 of that next year. So if the original owner died in 2011, then the first MRD must be taken by December 31, 2012.

As a non-spouse beneficiary, you must directly roll over the inherited assets to an Inherited IRA in your own name and use your own age and the IRS Single Life Expectancy Table for calculating the first year MRD. For each year after, you would subtract one year from the initial life expectancy factor.

View an example of a surviving child establishing an Inherited IRA by the December 31 deadline.

When there are multiple beneficiaries

When IRA assets are inherited by several individuals, each beneficiary should set up their own Inherited IRA by December 31 of the year following the year of death.

Any beneficiaries who do not separate their inherited IRA assets by that date will generally need to base their MRDs on the age of the oldest remaining beneficiary on the account as of December 31.

View an example of a surviving child not separating in a timely manner.

Inheriting a Roth IRA

If you inherit a Roth IRA and roll over to an Inherited Roth IRA, you must take MRDs (unlike the original owner, who was exempt from MRDs during their lifetime). The assets must be moved to an inherited IRA and the same rules apply for separating the assets as when there are multiple beneficiaries.

You must begin taking MRDs in the year after the year of death, using your age and the IRS Single Life Expectancy Table for MRD calculations. As long as the assets have been in the Roth IRA for five or more years, these MRDs can be taken tax-free.

View an example of a surviving child establishing an Inherited Roth IRA in a timely manner.

Next steps

Open an Inherited IRA.
Or call an inheritance specialist at 800-544-0003 to take the first step for your Inherited IRA.

Enroll in Automatic Withdrawal Service.
If you have a Fidelity Inherited IRA, simplify MRDs by using the Automatic Withdrawal Service.

Retirement Distribution Center
See how our Retirement Distribution Center can help you calculate and manage your minimum required distributions for your Fidelity IRAs (Traditional IRAs, SEP IRAs, SIMPLE IRAs, Rollover IRAs, and all small-business retirement plans).

If the beneficiary is an entity, charity, or non-qualifying trust, and the owner was still living by April 1 of the year following reaching age 70 1/2, the distributions would be based on the remaining Single Life Expectancy of the IRA owner. If the owner was younger than 701/2, the assets must be completely distributed by December 31 of the fifth year following the year of the IRA owner's death.

An exception is a “look-through” trust. If certain requirements are met, including that the trust is structured in such a way that the beneficiary is identifiable, the beneficiary may be able to take MRDs based on the date of birth of the oldest beneficiary of the trust. Consult your tax advisor to determine if a trust that names you as the beneficiary may be eligible for this MRD treatment.

Next steps

Open an Inherited IRA.
Or call an inheritance specialist at 800-544-0003 to take the first step for your Inherited IRA.

Enroll in Automatic Withdrawal Service. (login required)
If you have a Fidelity Inherited IRA, simplify MRDs by using the Automatic Withdrawal Service.

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Open an account

Choose a Traditional or Roth IRA, according to the type of IRA you have inherited:

Open an Inherited IRA

Open an Inherited Roth IRA

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IRS Single Life Expectancy Table
Age Life
expectancy
factor
Age Life
expectancy
factor
Age Life
expectancy
factor
0 82.4 38 45.6 76 12.7
1 81.6 39 44.6 77 12.1
2 80.6 40 43.6 78 11.4
3 79.7 41 42.7 79 10.8
4 78.7 42 41.7 80 10.2
5 77.7 43 40.7 81 9.7
6 76.7 44 39.8 82 9.1
7 75.8 45 38.8 83 8.6
8 74.8 46 37.9 84 8.1
9 73.8 47 37.0 85 7.6
10 72.8 48 36.0 86 7.1
11 71.8 49 35.1 87 6.7
12 70.8 50 34.2 88 6.3
13 69.9 51 33.3 89 5.9
14 68.9 52 32.3 90 5.5
15 67.9 53 31.4 91 5.2
16 66.9 54 30.5 92 4.9
17 66.0 55 29.6 93 4.6
18 65.0 56 28.7 94 4.3
19 64.0 57 27.9 95 4.1
20 63.0 58 27.0 96 3.8
21 62.1 59 26.1 97 3.6
22 61.1 60 25.2 98 3.4
23 60.1 61 24.4 99 3.1
24 59.1 62 23.5 100 2.9
25 58.2 63 22.7 101 2.7
26 57.2 64 21.8 102 2.5
27 56.2 65 21.0 103 2.3
28 55.3 66 20.2 104 2.1
29 54.3 67 19.4 105 1.9
30 53.3 68 18.6 106 1.7
31 52.4 69 17.8 107 1.5
32 51.4 70 17.0 108 1.4
33 50.4 71 16.3 109 1.2
34 49.4 72 15.5 110 1.1
35 48.5 73 14.8 111+ 1.0
36 47.5 74 14.1    
37 46.5 75 13.4    
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Example of transferring to Inherited IRA; deceased spouse older than age 70½

In this example, the deceased spouse was age 72 at the time of death. The surviving spouse is age 65 in the year after death.

The surviving spouse decided to transfer the assets into an Inherited IRA and start taking MRDs in the year after the year of death based on his or her own age.

Year of death 2011
Age of spouse at time of death 72 years old
Year of first MRD (year following death) 2012
Age of beneficiary (surviving spouse) in 2012 65
Fair market value of Inherited IRA on 12/31/2011 $100,000
2012 life expectancy factor
(based on the IRS Single Life Expectancy Table)
21.0
2012 MRD amount $4,761.90 ($100,000 / 21.0)
2013 life expectancy factor
(revised annually for spouse beneficiaries based on the IRS Single Life Expectancy Table)
20.2
2013 MRD amount 12/31/2012 Fair Market (Value / 20.2)
Fair market value of Inherited IRA on 12/31/2012 $100,000
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Example of transferring to Inherited IRA; deceased spouse younger than age 70½

In this example, the deceased spouse was age 52 at the time of death. The surviving spouse is age 70 in the year after death.

The surviving spouse decided to put the assets into an Inherited IRA, delaying MRDs until the deceased spouse would have turned 70½.

Year of death 2011
Age of spouse at time of death 52 years old (Date of birth 1/23/1959)
Year of first MRD (year deceased spouse would be 70½) 2029
Age of beneficiary (surviving spouse) in 2012 70
Age of beneficiary (surviving spouse) in 2029, the year the deceased spouse would have turned 70½ 87
2029 life expectancy factor
(based on the IRS Single Life Expectancy Table)
6.7
2029 MRD amount 12/31/2028 Fair Market (Value /6.7)
2030 life expectancy factor
(revised annually for spouse beneficiaries based on the IRS Single Life Expectancy Table)
6.3
2030 MRD amount 12/31/2029 Fair Market (Value / 6.3)
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Example of a surviving child establishing an Inherited IRA by December 31 of the year following the parent's death

Year of death 2011
Year of first MRD (year following death) 2012
Age of beneficiary in 2012 46
Fair market value of Inherited IRA on 12/31/2011 $100,000
2012 life expectancy factor
(based on the IRS Single Life Expectancy Table)
37.9
2012 MRD amount $2,638.52 ($100,000 / 37.9)
2013 life expectancy factor
(revised annually based on the IRS Single Life Expectancy Table)
36.9 (37.9 – 1.0)
2013 MRD amount 12/31/2012 Fair Market (Value / 36.9)
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Example of a surviving child not separating in a timely manner

In this example, the child does not establish and inherited IRA by December 31st of the year following parent's death.

Year of death 2011
Year of first MRD (year following death) 2012
Age of beneficiary #1 in 2012, child of original owner 46
Age of beneficiary #2 in 2012, child of original owner 50
Age of beneficiary #3 in 2012, sister of original owner 75
Fair market value of Inherited IRA on 12/31/2011 $100,000
2012 life expectancy factor would have been for
beneficiary #1
(based on the IRS Single Life Expectancy Table)
37.9
2012 life expectancy factor will be for all
beneficiaries using oldest beneficiary date of birth (based on the IRS Single Life Expectancy Table)
13.4
2012 MRD amount if could have used own LE $2,638.52 ($100,000 / 37.9)
2012 MRD amount using oldest beneficiaries LE $7462.68 ($100,000 / 13.4)
Additional MRD required for beneficiary #1 due to delay in separating accounts in a timely manner $4824.16
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Example of a surviving child establishing an Inherited Roth IRA in a timely manner

Year of death 2011
Year of first MRD (year following death) 2012
Age of beneficiary in 2012 46
Fair market value of Inherited IRA on 12/31/2011 $100,000
2012 life expectancy factor
(based on the IRS Single Life Expectancy Table)
37.9
2012 MRD amount $2,638.52 ($100,000 / 37.9)
2013 life expectancy factor
(revised annually based on the IRS Single Life Expectancy Table)
36.9 (37.9 – 1.0)
2013 MRD amount 12/31/201 Fair Market (Value / 36.9)

Questions?

Speak with an inheritance specialist.

*Fidelity Portfolio Advisory Service® is a service of Strategic Advisers, Inc., a registered investment adviser and a Fidelity Investments company. These services provide discretionary money management for a fee.
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