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LEARN MORE ABOUT: IRA Accounts

TRANSFER IRA TO GOLD: Gold IRA Account

TRANSFER IRA TO SILVER: Silver IRA Account

REVEALED: Best Gold Backed IRA

As people grow older and start their journey towards retirement, they often look for ways to safeguard their financial well-being. One of the ways they do this is by investing in an Individual retirement account (IRA). An IRA is an account with tax advantages that offers individuals a way to save for their retirement years.

However, what happens to that IRA when the person dies? If the IRA owner designated a beneficiary or beneficiaries, the IRA’s assets can be passed on to them. If you have recently inherited an IRA, it’s essential to understand what you can or shouldn’t do with it.

First, it’s important to know that the account’s legal requirements may vary depending on the type of IRA you’ve inherited. If you are the spouse of the deceased individual, the rules are a bit different than if you are a non-spouse beneficiary.

For non-spouse beneficiaries who inherit a Traditional IRA, you can either take a lump sum payment of the entire account balance or choose to take distributions referred to as Required Minimum Distributions (RMDs). RMDs typically need to start being taken by December 31st of the year following the IRA owner’s death. The RMDs must continue for the remainder of their life expectancy.

It’s crucial to note that these distributions are subject to taxes, and the amount of taxes you will pay will depend on the inherited IRA’s value and your tax bracket. In contrast, the Roth IRA is tax-free, so non-spouse beneficiaries may not pay taxes on inherited values.

If you are the spouse of the deceased IRA owner, you have more options than non-spouse beneficiaries. You may have the option to treat the inherited IRA as your own, in which case it becomes your account. You can roll over the funds into your account, take distributions when you reach 59 ½ years of age, and name your beneficiary.

It’s also essential to know that the IRS typically requires you to begin taking RMDs by April 1st of the year following the year you turn 72. Additionally, taking money out before the age of 59 ½ may result in a penalty.

In conclusion, inheriting an IRA may seem overwhelming, and you may be unsure of what to do next. Understanding your options and IRA type is crucial. Consult with a financial advisor or tax professional before making any decisions to ensure you make the best choices for your financial future.