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Dear Dr. Don,
I am the sole beneficiary of my mother's IRA. She passed away on April 2, 2006. I received a lump sum check for $93,106 May 3, 2007, and put it into a money market fund. I am now learning I had other options.
Basically my mother was 71½ when
she died, as her birth date was Nov. 15, 1934.
So I guess she would have started to need to
withdraw funds. I don't know if she had or not.
I haven't touched the funds. What can I do?
-- Daniel Denouement
 Dear
Daniel,
The law allows a nonspousal beneficiary to withdraw funds from an IRA as slowly as allowed under the required minimum distribution rules. Once your mother died, you became the owner of what is called an inherited IRA. The account has to be left in your mother's name with you as the beneficiary.
You're right that she had attained
the age of 70½, when she would have been required
to make minimum distributions for each year that
she was alive. In the year following death, required
distributions become tied to your life expectancy.
This rule allows distributions to be stretched
out over a long period, allowing you to pay income
taxes slowly and to take advantage of continued
tax-deferred growth on the account.
I am afraid, however, that the lump-sum withdrawal eliminates this possibility. There is really no clear provision that allows you to undo the withdrawal. Saying that, it never hurts to go back to the financial institution and ask them if there is anything that can be done, since you were not aware of your options.
I'm sorry to pass on this news, but this is important information to relay to other readers. For anyone that inherits an IRA or other qualified plan benefit, it is important to understand the rules before taking a withdrawal, which has income tax consequences. The time to talk to your tax professional is before any action is taken with an inherited account.
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