Need advice on managing and withdrawing funds from an inherited IRA?

Join us as we dive deep into the intricacies of inherited retirement accounts. If you’ve recently inherited an IRA for your child, you might be wondering about the best way to handle it.

In this video, we’ll show you how to find a top-notch financial advisor who can assist you every step of the way.

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Carl Zoellner, Esq. is a senior attorney at Anderson Business Advisors who specializes in strategic planning for business owners with a focus on asset protection and tax planning. Carl speaks across the country to educate small business owners on the tools available for their investments from legal and tax perspectives.

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Disclaimer

The information provided in this video should not be construed or relied on as legal advice for any specific fact or circumstance. Its content was prepared by Anderson Business Advisors with its main office at 3225 McLeod Drive Suite 100 Las Vegas, Nevada 89121. This video is designed for entertainment and information purposes only. Viewing this video does not create an attorney-client relationship with Anderson Business Advisors or any of its lawyers. You should not act or rely on any of the information contained herein without seeking professional legal advice….(read more)

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Withdrawing money from an inherited IRA can be a complex process that requires careful consideration and understanding of the rules and regulations governing these accounts. In this article, we will dive into the specifics of how to go about withdrawing funds from an inherited individual retirement account (IRA).

An inherited IRA, also known as a beneficiary IRA, is an account that is typically passed down to a non-spouse beneficiary upon the death of the account holder. Unlike traditional IRAs, inherited IRAs have different rules regarding withdrawals, which can significantly impact the tax implications and distribution options available to the beneficiary.

The first thing to keep in mind when withdrawing money from an inherited IRA is the age of the original account holder. If the account holder passed away before reaching the required minimum distribution (RMD) age of 72, the beneficiary will need to follow the RMD rules based on their own life expectancy.

Individuals inheriting an IRA from a deceased spouse have additional options. They can choose to roll over the inherited IRA into their own IRA, allowing them to postpone any required distributions until they reach the age of 72. This option provides more flexibility in terms of when and how much the beneficiary can withdraw from the account.

For non-spouse beneficiaries, the rules are slightly different. Generally, the beneficiary must begin taking distributions from the inherited IRA by December 31st of the year following the original account holder’s death. These distributions can either be taken as a lump sum or spread out over the beneficiary’s life expectancy, also known as the stretch IRA method.

It’s important to note that if the inherited IRA is a Roth IRA, the distributions are typically tax-free. However, if it is a traditional IRA, the distributions will be subject to ordinary income taxes. It is advisable to consult with a financial advisor or tax professional to determine the tax implications specific to your situation.

When planning to withdraw money from an inherited IRA, beneficiaries should also be aware of any penalties that may apply. In general, there is a 10% early withdrawal penalty for those under the age of 59 ½ unless an exception applies. However, beneficiaries inheriting an IRA are not subject to this penalty.

To initiate a withdrawal from an inherited IRA, beneficiaries typically need to contact the custodian or financial institution holding the account. They will then provide the necessary forms and guide the beneficiary through the withdrawal process. Beneficiaries may be required to provide documentation, such as the death certificate of the original account holder, to validate their status as a beneficiary.

In summary, withdrawing money from an inherited IRA requires careful consideration of the rules and regulations governing these accounts. It is crucial to understand the distribution options available, such as the RMD rules or the ability to roll over the inherited IRA into a personal account. Consulting with a financial advisor or tax professional can provide guidance and ensure compliance with the applicable laws. Ultimately, accessing the funds in an inherited IRA can provide financial support or help achieve specific financial goals.