After accumulating wealth for years, you want it to be inherited by the right beneficiaries when the time comes. (Instead of your ex-spouse from 10 years ago!)

If you are the one inheriting the IRA, you want to minimize the tax liability on your inheritance.

In this episode, J. Barry Watts explains the most tax-efficient way to handle inherited IRAs and setting up your IRA for optimal distribution to your loved ones.

Barry discusses:

– The importance of updating your beneficiary designation forms (and maintaining a copy)
– Who should — and shouldn’t — be named as a beneficiary on your IRA
– How to set up primary, contingent, and tertiary beneficiaries to avoid probate
– Key tax implications and distribution requirements for an inherited IRA
– And more

Resources:

New IRA & 401K Rules for 2023 (Ep. 55) –

Connect With Barry Watts:

Schedule an Introductory Call –
PriorityCare@WealthCareCorp.com
800-278-1755
WealthCareCORP.com
LinkedIn: J Barry Watts –
LinkedIn: WealthCareCorporation –
Twitter:@jbarrywatts –

Disclosure: The content has been made available for informational and educational purposes only, and is not intended to be a substitute for professional tax and investment advice always seek the advice of your own qualified advisor with any questions you may have regarding taxes and investing….(read more)

LEARN MORE ABOUT: IRA Accounts

TRANSFER IRA TO GOLD: Gold IRA Account

TRANSFER IRA TO SILVER: Silver IRA Account

REVEALED: Best Gold Backed IRA

When an individual passes away and they have an Individual retirement account (IRA), the account does not simply disappear. Instead, it is passed on to the individual’s designated beneficiaries, typically their spouse or children. However, inheriting an IRA comes with its own set of rules that beneficiaries must adhere to in order to avoid penalties.

Firstly, it is important to note that there are two types of inherited IRAs: a spousal IRA and a non-spousal IRA. If the beneficiary is the spouse of the deceased, they have the option to roll over the inherited IRA into their own account or keep it as a separate inherited IRA. If they choose to roll over the account, they are then subject to the same rules and regulations as any other IRA owner. If they decide to keep the account as an inherited IRA, they must begin taking required minimum distributions (RMDs) by December 31st of the year following their spouse’s death.

For non-spousal beneficiaries, the rules are slightly different. They are not allowed to roll over the inherited IRA into their own account, but rather must create a separate inherited IRA account. They are required to begin taking RMDs by December 31st of the year following the original account holder’s death. The RMDs are calculated based on the beneficiary’s age and life expectancy, which is determined by the IRS. It is important to note that the entire amount of the inherited IRA cannot be withdrawn at once, as it will be subject to income taxes and potentially early withdrawal penalties.

Additionally, beneficiaries must be aware of the five-year rule. If the original account holder had not yet reached the age of 70 1/2 and had not begun taking RMDs at the time of their passing, the beneficiary must distribute the entire balance of the inherited IRA by December 31st of the fifth year after the year of the original account holder’s death. Failure to do so will result in a penalty.

Inherited IRAs are not only subject to different rules and regulations, but they also carry different tax implications. Inherited IRAs are taxed as ordinary income, meaning the beneficiary must pay taxes on the distributions they receive. Additionally, if the original account holder had already begun taking RMDs, the beneficiary must continue taking them as well.

In conclusion, inheriting an IRA comes with its own set of rules and regulations that must be followed to avoid penalties. It is important for beneficiaries to educate themselves on these rules and seek the guidance of a financial advisor or tax professional to ensure they are properly managing their inherited IRA.