Inheriting an IRA from an American-based account isn’t an ideal situation for a Canadian. You could face thousands of dollars in losses if you don’t have good advice on how to transfer the money. That’s where we come in….(read more)

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Inherited IRA or Inherited Individual retirement account is an option for beneficiaries of an IRA (Individual retirement account) owner who has passed away, allowing them to receive the assets left in the account. The rules of Inherited IRA in Canada may slightly vary from those applicable in the United States. In this article, we will discuss Inherited IRA in Canada.

An Individual retirement account (IRA) is a retirement savings account that allows individuals to save for their retirement. It is a tax-advantaged account as contributions made to it are tax-deductible, and the growth of assets inside the account is tax-deferred. The IRA holder can invest their contributions in stocks, bonds, mutual funds, and other investment options, depending on the IRA type.

However, if the IRA account holder passes away, the remaining assets in the account pass on to the designated beneficiaries. In case of an Inherited IRA, the beneficiary receives the remaining account assets and is allowed to withdraw the money without penalties.

In Canada, a similar option is available to beneficiaries of a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) holder. If the TFSA or RRSP holder passes away, the remaining TFSA or RRSP assets can be transferred to the designated beneficiaries’ account. These accounts are known as Inherited TFSAs or Inherited RRSPs, respectively.

There are some rules and regulations that apply to Inherited TFSAs and Inherited RRSPs, just like in the case of an Inherited IRA. The beneficiary should be a spouse or a common-law partner to transfer the assets to their TFSA or RRSP account. If the beneficiary is not the spouse, the assets are transferred to a beneficiary’s account, and taxes are payable on the value of the transferred amount.

Moreover, if the beneficiary is a spouse or common-law partner, they have the option to transfer the amount to their TFSA or RRSP account without being taxable in the year of the transfer. However, if the beneficiary makes a withdrawal from the Inherited TFSA or Inherited RRSP account, the amount withdrawn will be taxable.

In conclusion, Inherited IRA, Inherited TFSA, and Inherited RRSP are helpful options for beneficiaries of an IRA, TFSA, or RRSP account holder, respectively. The rules and regulations applicable for Inherited TFSAs and Inherited RRSPs in Canada are similar to those of Inherited IRAs in the United States, specifying that eligible beneficiaries can transfer the assets without being subject to taxes, while the tax implications can be different in case of a withdrawal taken by the beneficiary.