Shawn Hochuli, an IWM Partners Financial Advisor with LPL Financial, discusses the complex rules surrounding Inherited IRAs. Topics discussed include a spouse assuming the retirement account as their own as well as some reasons the spouse may instead want to create an Inherited IRA. Non-spouses must follow certain rules created by the Secure Act, including the 10-year rule surrounding withdrawing the funds. He gives an example about when to take withdrawals from the IRA inside those 10 years, and ends with some important tips that apply to Inherited IRAs.

Dealing with an inheritance can often be confusing, and is one IWM Partners puts in the Estate and Legacy Planning section of the most common fears they see around retiring. That full video can be found below:

10 Common Retirement Fears:

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0:00 Introduction
0:59 Spousal Beneficiary Assumes IRA
1:24 Spousal Beneficiary Creates Inherited IRA
2:17 Non Spouse Beneficiary
2:27 10-Year Rule
3:32 WHEN To Take Withdrawals
3:55 Example Of Withdrawal Timing
4:06 Take It All Out Now
4:48 Take It All Out In 10 Years
5:18 Take Out Equal Amounts
6:13 Important Inherited IRA Tips
7:22 10 Common Retirement Fears

Advisory services offered through LPL Financial, a registered investment advisor and separate entity from IWM Partners. See finra.org or sipc.org.

Third party posts found on this profile do not reflect the views of LPL Financial and have not been reviewed by LPL Financial as to accuracy or completeness.

The financial professionals associated with IWM Partners may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.

Please consult your tax, legal, or financial advisor for advice specific to your situation. All examples are intended to be generic examples only, and all assumptions for tax and growth rates are estimates.

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Inherited IRAs Explained – Unraveling The Confusion Beneficiaries Face

Inheriting an Individual retirement account (IRA) can be a complex and confusing process for many beneficiaries. There are numerous rules and regulations surrounding inherited IRAs, and failing to understand them can result in costly mistakes and missed opportunities. In this article, we will explain the basics of inherited IRAs and help unravel the confusion that many beneficiaries face.

When an IRA holder passes away, the account typically passes on to one or more beneficiaries, who are designated by the account holder. These beneficiaries have several options for handling the inherited IRA, each with its own set of rules and potential implications.

One option for beneficiaries is to take a lump-sum distribution of the account balance. While this may seem like the simplest option, it can result in a hefty tax bill, as the distribution is typically subject to income tax in the year it is received. Additionally, beneficiaries under the age of 59 ½ may face a 10% early withdrawal penalty if they choose this option.

Another option for beneficiaries is to take required minimum distributions (RMDs) based on their life expectancy. This option allows beneficiaries to stretch out the distribution of the IRA over a longer period of time, potentially minimizing the tax impact. However, failure to take RMDs or taking more than the required amount can result in significant penalties.

Beneficiaries also have the option to disclaim the inherited IRA, allowing it to pass on to contingent beneficiaries. This can be a useful strategy if the original beneficiary does not need the funds or wishes to pass them on to another beneficiary.

It is important for beneficiaries to carefully consider their options and consult with a financial advisor or tax professional before making any decisions regarding an inherited IRA. Each option has its own set of rules and implications, and the best choice will depend on the beneficiary’s individual financial situation and goals.

In conclusion, inherited IRAs can be a challenging and confusing aspect of estate planning. By understanding the basics of inherited IRAs and seeking professional guidance, beneficiaries can make informed decisions and avoid costly mistakes. With careful planning and consideration, beneficiaries can maximize the value of their inherited IRAs and ensure that they meet their financial goals.