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Inheriting an IRA


After inheriting an IRA, you may have questions about IRS rules regarding making withdrawals. Age, IRA type and your relationship to the IRA owner influence distribution rules.

After inheriting an IRA (Individual Retirement Account), many people have questions about IRS rules regarding when and how they can start making withdrawals. Multiple factors influence inherited IRA distribution rules including: age, IRA type and the beneficiary’s relationship to the IRA owner.

These distribution requirements and rules for inherited IRAs are complicated, so consult with a financial advisor before making any final decisions.

Factors Affecting Distributions for Inherited IRAs

  • Age. Age effects payment options for Required Minimum Distributions (RMDs) for inherited IRAs. Two ages in particular—70½ (the age at which the IRS would require the original owner to start withdrawals) and 59½ (the age at which surviving spouses can start taking RMD payments from inherited IRAs without a 10% early withdrawal penalty)—have the most influence over RMDs.
  • IRA Type. Whether the IRA you inherit is a traditional or Roth IRA, you typically have to start taking withdrawals within five years after the death of the IRA owner. Withdrawals from Roth IRAs are generally tax-free, where a tax is typically levied on withdrawals from a traditional IRA.
  • Relationship to IRA Owner. Spouse and non-spouse beneficiaries have different distribution options for inherited IRAs. Spouses typically have the option to “assume” the IRA, meaning to treat it as their own and make contributions toward the IRA, as well as the option to inherit the IRA and take withdrawals. Non-spouse beneficiaries do not have the option to assume the IRA.

Distribution Options for Inherited IRAs

  • Assume the IRA (Spouse Only). You can make yourself the new IRA account holder or roll the IRA into an IRA you already own.
  • Lifetime Distributions. You can choose to make withdrawals from the inherited IRA over the course of your lifetime. The timing of when you must start taking RMDs depends on whether the original IRA owner died before or after reaching the age of 70½ (the age at which you must start making withdrawals). If they were at least 70½ at the time of their death, distributions must begin no later than December 31 of the year following the year of death. If they had not yet reached the age for mandatory distributions, you must start taking distributions no later than December 31 of the year in which they would have turned 70½ or the year following their death (whichever is later).
  • Five-Year Distributions. You can take distributions from the inherited IRA within five years after the death of the IRA owner. The balance of the IRA must be distributed in its entirety by the end of the fifth year. Distributions are subject to income tax, but not the 10% penalty for withdrawals made before the age of 59½.
  • Lump Sum Distributions. Take one distribution of the entirety of the IRA’s assets. The distribution is subject to income tax, but not the 10% early withdrawal penalty—unless the Roth IRA account was less than five years old at the time of the owner’s death.

After inheriting an IRA, you have to make several decisions impacting your inheritance. Contact a financial advisor to walk you through your available options.

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