Whose Name Works Best? - Brief Article

Kiplinger's Personal Finance Magazine, Nov, 2000 by Kimberly Lankford

Q&A -- The right way to handle an INHERITED IRA.

My 65-year-old husband just died, and I'm the beneficiary of his traditional IRA. How do I assume ownership of the account?

--M.S., Philadelphia

Are you certain that putting the account in your name is your best choice? If you're younger than age 59 1/2 and you need the money soon, says Paul Knott, a financial consultant with Salomon Smith Barney in Wilmington, N.C., it may make sense to leave the IRA in your late husband's name and tap it as a beneficiary. But if you choose this route, you must withdraw all the money by the end of the fifth year following the year of your husband's death or spread distributions over your life expectancy beginning by the end of the year your husband would have turned 70 1/2.

If you make the account your own, the basic rules apply to you: a 10% penalty for early withdrawals and the requirement you begin withdrawals the year after you reach age 70 1/2.

Whichever route you choose, notify the bank, brokerage or mutual fund that holds the IRA. You'll probably need to provide a death certificate and fill out a form specifying whether the money will go to your own or a beneficiary's IRA.