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Inherited traditional and Roth IRA rules require the beneficiary to begin taking distributions by the end of the year following the original account holder’s death. Failing to do so can result ...
Inherited IRA rules: 7 key things to know 1. Spouses get the most leeway. If someone inherits an IRA from their deceased spouse, the survivor has several choices of what to do with it:
The most tax-effective way to handle an inherited IRA is to open a beneficiary IRA. In this scenario, the IRA you inherit is transferred to a different IRA that lists you as the beneficiary.
In case of non-spouse inherited IRAs, the beneficiary cannot choose to treat the IRA as his or her own, but the following options are available: take out all of the assets within 10 years of the owners death (10-year rule); [ 16 ] withdrawals may be subject to federal taxes.
A nonspouse IRA beneficiary must either begin distributions by the end of the year following the decedent's death (they can elect a "stretch" payout if they do this) or, if the decedent died before April 1 of the year after he/she would have been 72, [a] the beneficiary can follow the "5-year rule". The suspension of the RMD requirements for ...
For example, while most non-spouse beneficiaries must spend down the accounts in 10 years, they only have a required minimum distribution (RMD) each year if the decedent was past the RMD age.
For instance, if a spouse inherits a Roth IRA and wants to treat it as their account, any earnings they withdraw will be taxable until they reach age 59½ and meet the five-year holding period.
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