[evsaranzak]

Hi,
My minor boys inherited an IRA from my parents when they passed away. Last week I received a letter stating that they (Financial Institution) records indicating that the boys are not currently set up to receive systematic distributions. And if they do not take a distribution--it could result in a 50% penalty tax on the difference between the amount they actually received & RMD.

They also stated the IRS generally requires that RMD's begin no later than December 31st of the year following the deceased IRA owner's year of death. My mother passed away in January of 2004--my dad 2 years before her. They also informed us that under certain circumstances, we may elect to delay the distributions as long as the entire account is distributed by December 31st of the year containing the fifth anniversary of the IRA owner's death.

Could you please explain all this in layman terms. And what we are supposed to do & when we're supposed to do it? I really look forward to an answer--not to mention, how much an answer would be appreciated! THANK YOU, Evelyn

[ScottGem]

First, RMD stands for Required Minimum Distribution. You don't say whether your parents had started withdrawing before their death as that might have a bearing. I found this site (searching on RMD) That has some info:

http://www1.evergreeninvestments.com...MD+Information

One point made was: The new rules allow the beneficiary(ies) to be chosen at any time and the payout schedules, in most cases, are not dependent upon the beneficiary(ies) age. After inheriting the IRA, the beneficiary, whether a spouse or not, can take the RMD based on his or her age.

This seems to indicate, they can just leave the IRA until they become of retirement age.

I would recommend you discuss this with a financial or tax advisor. I would also call the IRS to get their input.

I would look into transferring this money into one of the new college savings plans.