{"id":2802,"date":"2022-07-25T21:15:12","date_gmt":"2022-07-26T01:15:12","guid":{"rendered":"https:\/\/www.thewealthguardians.com\/staging\/3023\/?p=2802"},"modified":"2022-07-25T21:16:28","modified_gmt":"2022-07-26T01:16:28","slug":"inherited-iras-what-you-should-know","status":"publish","type":"post","link":"https:\/\/www.thewealthguardians.com\/staging\/3023\/inherited-iras-what-you-should-know\/","title":{"rendered":"Inherited IRAs: What You Should Know"},"content":{"rendered":"

<\/p>\"\"The rules and consequences of IRA beneficiary arrangements are complex<\/em>\n

The rules pertaining to Individual Retirement Account (IRA) beneficiaries are complicated. Here is a quick look at the limitations the Internal Revenue Service (IRS) places on the beneficiaries of IRAs.<\/p>\n

The biggest difference in the rules pertaining to IRA beneficiaries revolves around two separate issues: 1) when the IRA owner dies; and 2) who is the IRA beneficiary. If the IRA owner dies after required minimum distributions (RMDs) begin, the IRS rules are generally clear. Distributions must be made to the IRA beneficiary at least as rapidly as the distributions would have been made at the time of the IRA owner\u2019s death unless a spouse is the designated beneficiary and chooses to treat the IRA as his or her own.<\/p>\n

If the IRA owner dies before the RMDs begin, the rules are a bit more complex. If an IRA owner fails to designate a beneficiary, the IRA proceeds must be distributed to the IRA owner\u2019s estate within five years. If the IRA owner designates his or her spouse as the beneficiary, the spousal beneficiary has several options. Directly from the IRS:<\/p>\n

Inherited from spouse<\/strong>. If a traditional IRA is inherited from a spouse, the surviving spouse generally has the following three choices:<\/p>\n

    \n
  1. Treat it as his or her own IRA by designating himself or herself as the account owner.<\/li>\n
  2. Treat it as his or her own by rolling it over into a traditional IRA, or to the extent it is taxable, into a:\n
      \n
    1. Qualified employer plan<\/li>\n
    2. Qualified employee annuity plan (section 403(a) plan)<\/li>\n
    3. Tax-sheltered annuity plan (section 403(b) plan)<\/li>\n
    4. Deferred compensation plan of a state or local government (section 457(b) plan), or<\/li>\n<\/ol>\n<\/li>\n
    5. Treat himself or herself as the beneficiary rather than treating the IRA as his or her own.<\/li>\n<\/ol>\n

      If a surviving spouse receives a distribution from his or her deceased spouse\u2019s IRA, it can be rolled over into an IRA of the surviving spouse within the 60-day time limit, as long as the distribution is not a required distribution, even if the surviving spouse is not the sole beneficiary of his or her deceased spouse\u2019s IRA.<\/p>\n

      Inherited from someone other than spouse. If the inherited traditional IRA is from anyone other than a deceased spouse, the beneficiary cannot treat it as his or her own. This means that the beneficiary cannot make any contributions to the IRA or roll over any amounts into or out of the inherited IRA. However, the beneficiary can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of the beneficiary.<\/p>\n

      Like the original owner, the beneficiary generally will not owe tax on the assets in the IRA until he or she receives distributions from it.<\/p>\n

      Inherited ROTH IRAs<\/strong><\/p>\n

      Generally, the entire interest in a Roth IRA must be distributed by the end of the fifth calendar year after the year of the owner\u2019s death unless the interest is payable to a designated beneficiary over the life or life expectancy of the designated beneficiary.<\/p>\n

      If paid as an annuity, the entire interest must be payable over a period not greater than the designated beneficiary\u2019s life expectancy and distributions must begin before the end of the calendar year following the year of death. Distributions from another Roth IRA cannot be substituted for these distributions unless the other Roth IRA was inherited from the same decedent.<\/p>\n

      If the sole beneficiary is the spouse, he or she can either delay distributions until the decedent would have reached age 70\u00bd or treat the Roth IRA as his or her own.<\/p>\n

      RMD Rules<\/strong><\/p>\n

      When a traditional IRA is transferred into an inherited IRA, there are RMD rules to follow, set by the IRS. Your options for taking distributions from the IRA are based on when the original IRA owner died.<\/p>\n

      If the original IRA owner died before December 31, 2019, and\u2026<\/strong><\/p>\n