The Drink: The Grandfather
The Topic: Inheriting Retirement Accounts

At some point in your life you may inherit a retirement account or two. Or seven. And if losing a loved one isn’t hard enough, you will be presented with some difficult decisions when it comes to settling these types of accounts properly. On this week’s episode, Jason and Caleb explain the rules, and tell you how you can best handle distributions from inherited accounts….(read more)

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When planning for retirement, people often consider setting up an Individual retirement account (IRA) to ensure a comfortable future. However, many do not pay enough attention to how their IRA can be inherited after they pass away. On Episode 42 of the Retire Happy podcast, Jim Black discusses the steps involved in inheriting an IRA.

The first step in inheriting an IRA is to understand the type of IRA one is dealing with. There are two main types of IRAs: Traditional and Roth. The rules governing the inherited IRA can vary depending on the type of IRA inherited. Therefore, it is essential to understand the rules specific to each type of IRA.

The second step is to determine who the beneficiaries of the IRA are. The beneficiaries of an IRA can be named individuals, trusts, or even charities. If there are no designated beneficiaries, the IRA will pass according to the IRA custodian’s default designation.

The third step is to ensure that the beneficiary form is up to date and accurately reflects the beneficiary’s intentions. It is important to review IRA beneficiary forms periodically and make changes if necessary. Failure to update these beneficiary forms can lead to significant complications in the future.

After the death of the IRA holder, the inheritor must inform the custodian of the IRA of the account owner’s death. The custodian will then distribute the IRA following the inherited IRA rules.

If the IRA is left to a spouse, they have a few options. They can roll the inherited IRA into their own IRA or treat it as their own account. They can also choose to take distributions according to the inherited IRA rules.

Inheritance of an IRA by a non-spouse beneficiary has different rules. The non-spouse beneficiary will be required to take Required Minimum Distributions (RMDs) each year, calculated based on their life expectancy or the account owner’s remaining life expectancy.

In conclusion, inheriting an IRA can be complicated if one is not familiar with the rules and regulations. Therefore, it is crucial to plan ahead, review beneficiary forms, and understand the available options to ensure a smooth transition. The Retire Happy podcast offers valuable insights and advice to help navigate this process and ensure a bright financial future.