10.30.23

Inherited IRAs: Things all beneficiaries should know


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If you’ve recently inherited an individual retirement account (IRA), you you will discover some tricky rules for those IRAs. One wrong decision can even lead to a greater tax liability for you and your family.

An inherited IRA is defined as an individual retirement account opened when you inherit a tax-advantaged retirement plan like an IRA or a retirement-sponsored plan such as a 401k, following the death of the owner.

Here are some things to consider with an inherited IRA.

  • If you are the spouse of the original owner, you have one set of parameters regarding RMDs. If you’re a minor child, or not more than 10 years younger than the original owner, you have another set of choices.
  • Whether the original account owner had to take required minimum distributions (RMDs) can also influence what you can and should do with the IRA.

More parameters for inherited IRAs can be found here.

The IRS site offers comprehensive rules on distributions from IRAs, and it’s a great resource to answer questions. But what the IRS doesn’t offer is advice on which course of action you should take or what might be best for your individual situation. 

The next move? Consult with a financial advisor or attorney with knowledge of inherited IRAs.