Not understanding the basics rules for inheriting an IRA can cost the beneficiary of an IRA money. The below information summarizes the key points of inheriting an IRA.

Inheriting Traditional IRA as Spouse
When a spouse inherits an IRA they first need to retitle the IRA into their own name. By doing this they are avoiding any tax consequences. Spouses with inherited Traditional IRAs can keep assets in the account until they reach the age of 70-1/2 when “Required Minimum Distributions” begin.

Inheriting Roth IRA as Spouse
When a spouse inherits a Roth IRA from the deceased spouse they are not required to ever take distributions from the inherited Roth IRA. If they choose to take distributions from the account, they have reached age 59 ½ those distributions are tax free.

Inheriting Traditional IRA for Individual other than Spouse
When an IRA is inherited by a non-spouse it cannot be rolled/combined with another of the beneficiary’s pre-existing IRAs. It remains separate and titled as an inherited IRA. An owner of an inherited IRA must make a minimum distribution based on their age and the distribution will be taxed. Required withdrawals continue every year until the IRA has a $0 balance. Minimum required distributions (RMDs) start December 31 of the year following the death of the original owner of the IRA.

Inheriting Roth IRA for Individual other than Spouse
The IRA must be retitled in the recipient’s name and cannot be combined with an existing Roth IRA account. If the Roth IRA was funded longer than 5 years prior to inheriting it, required distributions are tax free. Minimum required distributions (RMDs) start December 31 of the year following the death of the individual in which you inherited the IRA. The recipient of an inherited Roth IRA may take withdraw more than the minimum amount up to the entire account balance if they choose to do so within a 5-year period. All of the above-mentioned withdrawals are tax free.

– Wyatt Swartz

– Contributions by Bryant Goacher

– 5/30/2018