If you inherit an IRA from a spouse, relative, or friend, there are a few important things to know. Please subscribe to my channel to keep up with all of my investing and personal finance content!
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retirement planning is a critical part of financial security. An important part of this planning involves understanding the rules and regulations surrounding inherited IRAs. This article will provide an overview of the various rules and regulations that govern inherited IRAs, as well as provide some tips on how to maximize the benefits of an inherited IRA.
First, it is important to understand the basics of an inherited IRA. An inherited IRA is an account that is opened by the beneficiary of a deceased individual’s retirement account. This type of account is set up by the beneficiary and is used to manage and distribute the funds that were left behind in the deceased individual’s retirement account.
When a beneficiary inherits an IRA, they must take certain steps in order to ensure that the funds are properly managed and distributed. First, the beneficiary must open an inherited IRA account with a financial institution. This account will be used to manage the funds and make distributions to the beneficiary.
Once the account is opened, the beneficiary must decide how to manage the funds. They can choose to take distributions from the account, or they can leave the funds in the account and allow them to grow. It is important to note that the funds in an inherited IRA are not subject to the same rules as a regular IRA. For example, the beneficiary does not need to wait until they reach the age of 59 ½ before taking distributions.
In addition to managing the funds, the beneficiary must also keep track of the required minimum distributions (RMDs). RMDs are the amount that the beneficiary must withdraw from the account each year in order to avoid a penalty. The amount of the RMD depends on the age of the beneficiary, as well as the size of the account.
Finally, the beneficiary must also keep track of any tax implications associated with the inherited IRA. The funds in an inherited IRA are not subject to the same taxes as a regular IRA, but they are still subject to certain taxes. For example, any distributions taken from the account are subject to income taxes. It is important to consult with a tax professional to ensure that all taxes are properly accounted for.
Inherited IRAs can be a great way to ensure that the funds left behind by a deceased individual are managed and distributed properly. However, it is important to understand the rules and regulations that govern these accounts. By understanding these rules, beneficiaries can maximize the benefits of an inherited IRA and ensure that their financial future is secure.
Great video! Thanks, Matt!
Say, may I ask what are YOUR thoughts on my situation? 🙂
A beloved friend (not spouse) who died in 2002 at the age of 63, had me as her beneficiary for her Pension Plan (not an IRA or 401k). Those funds (45K) were just sitting there, unbeknownst to me, untouched, and growing since 2002. So, having discovered its existence, the full amount was just now rolled over (untaxed) into an newly opened "Inherited IRA" (not Roth or Trad). She would have been 83 years old right now, and I just turned 59 (just as my wife).
SO, what are the RULES/OPTIONS on withdrawing money from this "Inherited IRA" funded with retirement money from a death in 2002?
I sort of understand that in this specific case, THE OLD RULES APPLY, and not the new Secure Act law, BUT WHAT are those OLD RULES in this specific case, and what TAX IMPLICATIONS/STRATEGIES apply here? My wife and I make about 30k filing jointly in SC.
Hi, I inherited a traditional IRA from my uncle who lived in California
I live in the United Kingdom, if I take a lump sum to close out the account, is there a tax deduction to the IRS in the United States?
even though they are waiving the penalties for not taking inherited RMDs in 2021-22, do you still have to retroactively take the rmds? what would the IRS do if you didnt? And do you have to take inherited Roth Rmds inherited after 2020?
Thanks, Matt. As a non-spouse holder of an inherited IRA, may I wait until the last month of the last year of the 10-year withdrawal "window" and close the account by withdrawing 100 percent of the balance, or do the rules require at least some amount of withdrawal every year during that 10-year window? (I understand that there might be tax reasons not to do that–just need to know what the rules allow and require.)
Hey Matt! Thank you for the video. I was wondering, if you are a non-spouse adult and inherit a traditional IRA can the positions be transferred to a taxable account like a brokerage account? This will obviously be a taxable event, but would the beneficiary have a different cost basis to calculate the gains and thus taxes on those transfers?