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Inheriting an IRA

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What is an Inherited IRA?

An Inherited IRA, or a Beneficiary IRA, is an account that is opened when someone inherits an IRA or employee-sponsored retirement plan after the death of the original owner. As a beneficiary, you can’t make additional contributions, but with an Inherited IRA the funds can remain tax-deferred, and you can generally withdraw money right away without a penalty. Inherited IRAs are typically opened for non-spouse beneficiaries, as spouses can transfer inherited assets directly into their own personal retirement accounts.

You do have to take Required Minimum Distributions (RMDs) from an Inherited IRA, the timing of which is based on the age of the original account holder, and the amount is based on your own life expectancy and the account value. However, by only taking out the RMD amount each year, you can continue to grow the financial life of your Inherited IRA, and can pass it in turn to your own future heirs.

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Inherited IRA FAQs

Anyone (a spouse, non-spouse, or entity) who has inherited the assets of an IRA or employer-sponsored retirement plan is eligible to open an Inherited IRA. Eligible IRAs include Traditional, Rollover, SEP, SIMPLE, and Roth IRAs.
Yes. You can transfer the existing IRA into your name and defer distributions until you are required to take the Required Minimum Distribution (RMD). If you plan to take a distribution before you reach age 59½, you can open an Inherited IRA. Consult your tax advisor for more details.
No. Only spousal beneficiaries can treat Inherited IRA assets as their own.
No. As a non-spouse beneficiary, you cannot leave the assets in the original account holder's IRA and continue distributions from that account. You can either transfer the assets into an Inherited IRA or take a lump-sum distribution.
No. Contributions to Inherited IRAs are not permitted.
Yes, unless you are a spouse beneficiary. Non-spouse Inherited IRA owners are subject to Required Minimum Distributions (RMDs), and the options available to you will depend on your situation. Consult your tax advisor for more details.
Yes. If you open an Inherited IRA, certain rules determine when you must take distributions. These rules are based on the type of IRA inherited, the age of the original account holder at his or her death, and the type of Inherited IRA opened. Consult your tax advisor for more details.


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