I was quoted recently in an article published in the U.S. News and World Report. The article was titled, “What You Should Know About Inherited IRAs.”

The article had three main points of emphasis.

First, it discussed what happens when a surviving spouse inherits an IRA. Generally, the surviving spouse, for Required Minimum Distribution purposes, can treat the IRA as his or her own IRA and postpone taxable distributions until that surviving spouse reaches the age of 70.5

Second, if a non-spouse is designated as a designated beneficiary of the IRA (typically, a child or children), then the non-spouse beneficiary must start taking distributions the year after the original IRA owner’s death. This occurs even if the beneficiary is less than 59.5. The distribution is calculated based on the life expectancy of the beneficiary.

Third, the article addresses how the beneficiary is not bound to the investment decisions made by the original IRA owner. The beneficiary can alter the investments in the IRA or Inherited IRA….(read more)

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Inheriting an IRA can be a little bit complicated. Depending on the circumstances surrounding the IRA, there are different rules and regulations that need to be followed. One type of IRA that is commonly inherited is an Inherited IRA. In this article, we will explore some important things that you should know about Inherited IRAs.

First and foremost, it is important to note that Inherited IRAs are different from regular IRAs. An Inherited IRA is an IRA that is left to someone, usually a spouse, child, or other family member, after the original owner of the IRA passes away.

One of the most important things to understand about Inherited IRAs is that the rules surrounding them can be quite complex. For example, the required minimum distribution (RMD) rules for Inherited IRAs are different from the RMD rules for regular IRAs. Inherited IRAs are also subject to different tax rules than regular IRAs.

The tax treatment of an Inherited IRA depends on several factors, including the relationship between the original owner of the IRA and the beneficiary. For example, if the IRA is inherited by a spouse, the spouse may have several options for how to handle the inherited IRA. One option is for the spouse to roll over the IRA into their own IRA. This can be a useful strategy for delaying RMDs and for consolidating retirement accounts.

If the IRA is inherited by a non-spouse beneficiary, the rules are a bit different. In most cases, non-spouse beneficiaries must take RMDs from the account, regardless of their age. Additionally, the RMDs must be taken over the beneficiary’s lifetime. This means that the size of the RMDs will vary from year to year, depending on the beneficiary’s life expectancy.

It is also important to note that Inherited IRAs are not protected from creditors. If the beneficiary of an Inherited IRA declares bankruptcy, the IRA may be subject to seizure by creditors.

Finally, it is important to remember that Inherited IRAs are subject to different rules than regular IRAs. For example, Inherited IRAs cannot be rolled over into a new IRA, and Inherited IRAs are not eligible for contributions.

In conclusion, Inherited IRAs can be a valuable source of wealth for beneficiaries, but they can also be complicated. It is important to understand the rules and regulations surrounding Inherited IRAs before making any decisions about how to handle them. Consulting with a financial professional or tax advisor can be helpful in navigating the rules surrounding Inherited IRAs.