In this video we breakdown some of the things you should and shouldn’t do with your Inherited IRA.
00:00 – Intro
01:12 – Ed Slott Plug
01:42 – Don’t Contribute
02:40 – Don’t Roth Convert
03:09 – Can Move Custodians
03:30 – Don’t Indirectly Rollover/Transfer Custodians
04:20 – Don’t use Illiquid Securities
06:10 – Can do Qualified Charitable Distributions
07:45 – Can Liquidate without 10% Penalty
09:02 – Calls to Action
@EdSlottandCompanyIRA Article –
Schwab Article –
EDB –
NEDB –
NDB –
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Inherited IRAs – What should I do with this?
Inheriting an IRA can be a bittersweet experience. On one hand, it is a nice financial windfall that can provide significant support for your future. On the other hand, it can be a confusing and overwhelming situation, especially if you are not familiar with the rules and regulations surrounding inherited IRAs. So, what should you do with this inherited IRA?
First and foremost, it is important to understand the rules and options available to you as the beneficiary of an inherited IRA. Unlike a traditional or Roth IRA that you have been contributing to during your working years, an inherited IRA has different rules and distribution requirements. Typically, you have a few options for handling an inherited IRA:
1. Take a lump sum distribution: This option allows you to cash out the entire IRA balance at once. While this may seem like a tempting option, it could result in a hefty tax bill as the distribution will be considered taxable income. Additionally, taking a lump sum distribution may also push you into a higher tax bracket.
2. Take required minimum distributions (RMDs): As the beneficiary of an inherited IRA, you are required to take RMDs based on your life expectancy or the original account holder’s life expectancy if they had not started taking distributions. This option allows you to spread out the tax burden over time and potentially minimize the impact on your taxes.
3. Transfer the funds to an inherited IRA: By transferring the funds to an inherited IRA in your name, you can continue to benefit from the tax-deferred growth of the account. This option also allows you to take RMDs over time, giving you more control over your tax liability.
When deciding what to do with an inherited IRA, it is important to consider your financial situation, tax implications, and long-term financial goals. Consulting with a financial advisor or tax professional can help you make an informed decision that aligns with your overall financial strategy.
In conclusion, inheriting an IRA can be a valuable asset, but it is essential to understand your options and the rules surrounding inherited IRAs. By carefully considering your options and seeking professional guidance, you can maximize the benefits of your inherited IRA and ensure that it aligns with your financial goals.
Inherited IRA . My mother-in-law passed went to the bank was told that it was 100% father in law. In month 20 they call my father in law and told him that my mother in law need to start Taking distributions. He was not comfortable talking about this with somebody calling him. He call his bank manager she said that she would look into it and call him back. When she call back she said my wife was 50% owner. She would like to write her part of to him. Problem is the IRS has a 9 month rule. We are now at 22 months because the bank can’t find a way to do this.
Thanks for the well-explained information. I have a timely question re: my 2023 income taxes. I'm a 58-year-old NEDB who inherited a traditional (pre-tax) IRA in the form of an annuity from my mother who passed away in 2022 at age 83 (after her RMD for this particular account). I was unaware of the 10 year rule at the time and (foolishly) elected to withdraw the lump sum—let's call it $100k—in 2023 so I received a Form 1099-R. I'm just trying to make sure that I'm responsible for paying tax on the full amount. Base on my research, I believe this is the case. I did note that you mentioned "non-deductible money inside the IRA" in the video. My question is: How do I go about finding out if this inherited IRA has any non-deductible funds in it? If it helps, in the IRS Form 1099-R the box 2b has "Taxable amount not determined" checked off and the "Total distribution" box is also checked off. Thank you!
Good topic. We inherited a non-spouse IRA and are taking regular taxable withdrawals while maximizing a 401k for the same amount. Basically we are draining the account gradually to abide by the 10 year rule by moving the money (in-kind) into a 401k to continue to defer the taxes.