If you have inherited an individual retirement 🎉account (IRA) from a parent or any other relative, you do not need to turn the account over to thꩲe estate, even if the will says otherwise.

Learn more about the rules for inheriting reti🀅rement accounts like IRAs, including how they are typically taxed and the rules for making withdrawals.

Beneficiaries

The designation of a primary beneficiary for an IRA is important. Whether you want to leave your traditional or Roth IRA account to your spouse or your children,ꦯ you must designate them as beneficiaries. You should also keep your IRA beneficiary list up to date as your family circumstances c꧒hange.

Assets that pass by beneficiary designation are not probate assets and are not subject to the terms of the will. An IRA account is a common example of an asset that is not a probate asset, said Michael Delgass, Managing Director of Wealthspire Advisors. "These assets have a contractual agreement with the entity holding them that requires that entity to pay them out to the beneficiary,” he said.

Inherited IRA distribution rules will vary depending on whether or not the IRA is inherited from 🌄a spouse or a non-spouse. If you inherit an IRA from your spouse, it can have the same distribution rules as your ꩲpersonal IRA.

Options for Funds Inherited From an IRA

When you inherit an IRA, you can either remove the money from the account in a lump sum or roll the money into an "inherited IRA" in your name and take withdrawals over 10 years. (The 10-year time period begins December 31 of the year following the death of the accountholder.)

Traditional IRAs and inherited traditional IRAs are tax-deferred accounts. That means that income tax is charged on the distributions because the deposits were made with pre-tax money. Typically, you must take required minimum distributions (RMDs) if the original account holder has already started taking them.

With Roth IRAs, you do not pay taxes on withdrawals since the deposits were made with after-tax funds. If the inherited Roth IRA account is over five years old, you can also withdraw tax-free earnings. You will not have to take 澳洲幸运5官方开奖结果体彩网:required minimum distributions.

Cash on Hand

If the will asks for “cash on hand” to be distributed among family members, this does not include funds you inherit from an IRA account. You are not required to provide the executor with the proceeds from the IRA. The beneficiary designation supersedes any provision in the will. A beneficiary designation takes precedence ove𝓰r terms listed in a will.

“Cash on hand refers to readily a🐠ccessible cash, and since [traditional] IRA distributions are taxable, I would personally not include that in cash on hand,” said Adam Harding, a financial advisor in Scottsdale,꧅ Arizona.

Frequently Asked Questions (FAQs)

The Bottom Line

澳洲幸运5官方开奖结果体彩网:Keep your inherited IRA and be aware of distribution policies and taxes on those distributions. Inherited IRAs must either be distributed within five years of receiving them, or that time period can be extended so that inherited assets can be distributed over the beneficiary’s life expectancy. In either case, distribution from an inherited IRA is considered income and taxed accordingly.