Understanding an Inherited IRA
An inherited IRA is a type of retirement account that arises when someone inherits an Individual Retirement Account (IRA) or employer-sponsored retirement plan following the death of the original owner. The term beneficiary refers to the person or entity (such as an estate or trust) that receives such assets. Inherited IRAs can be traditional, Roth, rollover, SEP, or SIMPLE IRAs and come with unique rules for spousal and non-spousal beneficiaries.
A beneficiary might choose to open an inherited IRA by transferring the deceased person’s account assets into their own name following the individual’s passing. Generally, this process involves rolling over funds from a traditional IRA or Roth IRA to an inherited IRA if the deceased person had already taken distributions. If the deceased had not taken distributions, the beneficiary can choose between rolling over the funds to their existing individual retirement account or setting up a new inherited IRA.
It’s essential to note that additional contributions cannot be made to an inherited IRA, as it is only meant for holding assets passed down from a decedent. Inherited IRAs are subject to specific rules regarding tax reporting and distributions. The Internal Revenue Service (IRS) requires Form 1099-R and Form 5498 for reporting distributions and reporting the status of inherited IRA accounts, respectively.
Inherited IRAs can differ significantly depending on whether the beneficiary is a spouse or a non-spouse. The rules governing taxation, distribution requirements, and rollover options vary substantially between these two categories. A comprehensive understanding of inherited IRA regulations is crucial to managing these assets effectively and maximizing potential financial benefits while adhering to tax implications.
Stay tuned for the following sections, which will delve deeper into specific aspects of inherited IRAs, including rules for opening an inherited IRA, taxation and reporting requirements, options for spousal beneficiaries, and the impact of the SECURE Act on non-spouse beneficiaries.
Rules for Opening an Inherited IRA
Understanding the intricacies of opening an inherited IRA involves a clear distinction between inherited IRAs and regular IRAs. An inherited IRA, also referred to as a beneficiary IRA, is an account established by a person who inherits funds from an existing Individual Retirement Account (IRA) or employer-sponsored retirement plan following the death of the original account owner. This term can apply to any type of IRA, including traditional, Roth, rollover, SEP, and SIMPLE IRAs. The process for opening an inherited IRA is crucial to ensure proper management of the assets, adherence to tax laws, and compliance with Internal Revenue Service (IRS) regulations.
First, it’s essential to recognize that inherited IRAs are not the same as regular IRAs. While the original account owner could contribute additional funds, make investment choices, and manage distributions during their lifetime, an inheritor can only manage the assets according to specific rules. Additionally, no further contributions can be made to the inherited IRA.
To open an inherited IRA, the beneficiary must first transfer assets from the deceased individual’s retirement account into the new inherited IRA. The Internal Revenue Service (IRS) mandates that this transfer be completed even if a lump-sum distribution is planned. Once the funds are transferred, they become the property of the inheritor and can no longer be treated as assets of the deceased person’s estate.
The IRS has established guidelines for inherited IRA beneficiaries, which include specific reporting requirements via Form 1099-R and Form 5498 to ensure proper taxation of distributions. Understanding these forms is critical when dealing with an inherited IRA, as the tax treatment of withdrawals depends on whether it’s a traditional or Roth IRA.
As part of the process for opening an inherited IRA, beneficiaries should consult their financial advisors to ensure they fully comprehend the rules and regulations surrounding inherited IRAs—particularly those related to taxation and minimum distributions (RMDs). Proper planning can help minimize taxes, optimize income, and enable the beneficiary to make informed decisions regarding the use and management of the inherited funds.
In the following sections, we will explore the rules for spousal and non-spousal beneficiaries, as well as how tax laws have changed with the SECURE Act. By gaining a thorough understanding of these topics, you’ll be well equipped to navigate the complexities of managing an inherited IRA and making the most of your inherited retirement savings.
IRS Reporting and Taxation for Inherited IRAs
Understanding the complexities of taxes and reporting requirements for an inherited IRA is crucial to avoid potential pitfalls. Regardless of whether you inherit a traditional or Roth IRA, you will need to file specific forms with the Internal Revenue Service (IRS) upon receiving distributions from the account.
Form 1099-R: A key document in this process, the Form 1099-R reports the distribution of assets from an inherited IRA to the beneficiary. This form provides essential information for taxation purposes, including the distribution amount, taxable portion (for traditional IRAs), and applicable tax year.
Form 5498: Another essential document related to inherited IRAs is Form 5498. This form reports contributions made to an IRA or distributions taken during the calendar year in question. Inherited IRA beneficiaries will receive a Form 5498-SA, which reflects both their basis (the amount of funds they inherit from the deceased account owner) and any subsequent distributions taken.
Taxation for Traditional IRAs:
The tax implications of inherited traditional IRAs vary depending on your relationship with the original account holder and whether you choose to roll over or distribute the assets. If you are a spouse, you can roll over the funds into your own IRA and delay taxes until required minimum distributions (RMDs) are triggered at age 72. For non-spousal heirs, the IRS mandates that the entire account must be emptied within ten years following the original account holder’s death, leading to taxable income in each year that a distribution is taken.
Taxation for Roth IRAs:
Unlike traditional IRAs, inherited Roth IRAs do not require distributions, as long as the beneficiary is a spouse or a designated beneficiary. Spouses can roll over Roth IRA assets into their own account and enjoy tax-free growth, while non-spousal beneficiaries have the option to take distributions over their lifetime or within ten years after inheriting the account. These distributions are subject to income taxes based on the original owner’s contributions.
In summary, inherited IRAs come with unique reporting and taxation requirements that vary depending on whether you inherit a traditional or Roth IRA. Understanding these rules will help minimize potential penalties, optimize your tax situation, and ensure compliance with the IRS.
Rules for Spousal Beneficiaries of Inherited IRAs
Spouses have more leeway when it comes to handling an inherited IRA compared to non-spouse beneficiaries. One of the primary advantages for spouses is the ability to roll over their deceased spouse’s IRA into their own existing individual retirement account (IRA). This option allows them to defer required minimum distributions (RMDs) until they reach 73 years old, which is the current age limit for beginning RMDs. Spouses have 60 days from receiving a distribution to roll it over into their personal IRA without incurring tax penalties.
Upon inheriting an IRA, spousal beneficiaries can also set up a new inherited IRA account. The way they handle the inherited funds depends on whether the deceased spouse had already started taking RMDs or not. If the original owner was receiving RMDs when they passed away, the surviving spouse must continue to take those distributions as calculated or adjust them based on their own life expectancy. Alternatively, they may choose to roll over the inherited funds into their own IRA and defer RMDs until their required beginning date (RBD), which is 73 years old.
The process of rolling over an inherited IRA into a spouse’s account or setting up a new inherited IRA involves several steps:
1. Open a new IRA account in your name at your preferred financial institution.
2. Contact the trustee of the deceased spouse’s IRA to request a transfer of funds to the new account. You may be required to provide proof of death, such as a copy of the death certificate or an affidavit, depending on the policies of the trustee.
3. Complete the necessary forms and follow any additional instructions from the trustee. The process may vary slightly depending on the financial institution and specific circumstances.
4. Monitor the transfer to ensure it is completed successfully. Once the assets have been transferred, you can then manage the inherited IRA as you would a regular one, including investments, RMDs, and distributions.
Inherited IRAs for spousal beneficiaries follow the same rules regardless of whether they are traditional or Roth IRAs. The tax treatment depends on the type of IRA that was inherited—traditional IRAs involve taxable distributions, while Roth IRAs allow tax-free withdrawals.
By understanding the rules and options available to spousal beneficiaries of an inherited IRA, they can maximize their benefits and ensure a more efficient management of the inherited funds.
Rules for Non-Spousal Beneficiaries of Inherited IRAs Pre-SECURE Act
Inheriting an IRA as a non-spouse beneficiary comes with unique challenges. Before the SECURE Act of 2019, non-spousal heirs had more flexibility in handling their inherited retirement accounts. They could calculate distributions based on their own life expectancies to minimize taxes and extend their payout periods. However, this is no longer the case.
Understanding Distribution Rules Pre-SECURE Act
When an individual inherits a traditional IRA or Roth IRA from a non-spouse, they have several options for managing distributions:
1. Disclaim the inheritance: This option involves forfeiting the inherited assets and passing them on to alternate beneficiaries named in the deceased person’s will or trust. If no alternate beneficiaries are listed, the inheritance goes to the estate.
2. Roll over the inheritance into their own IRA: The beneficiary may transfer the funds from the inherited account to an existing individual retirement account (IRA) in their name. This method allows them to continue making contributions and taking required minimum distributions (RMDs) based on their own life expectancy.
3. Take a lump sum distribution: The beneficiary can opt for a full, taxable payment of the inherited funds within 60 days of receiving the IRA proceeds. They will be responsible for paying income taxes on the distribution in the year it was received.
4. Transfer the assets into an inherited IRA: The beneficiary can set up a new inherited IRA and manage distributions based on their own life expectancy. RMDs must begin by December 31 of the year following the deceased owner’s death, using their age as a reference (instead of the deceased owner’s age).
The IRS mandates that non-spouse beneficiaries use the Single Life Expectancy Table to calculate their RMDs. This table has shorter life expectancy factors than those used for spousal beneficiaries, resulting in smaller withdrawals and lower taxes for beneficiaries.
Comparing Inherited IRAs for Spouses vs. Non-Spouses: Tax Implications Pre-SECURE Act
In the case of an inherited IRA from a deceased spouse, the surviving spouse typically has more flexibility when it comes to managing distributions and taxes:
1. Roll over the funds into their own IRA: The surviving spouse can choose to consolidate the inherited IRA with their existing retirement accounts and continue making contributions if they are still working or have earned income.
2. Set up an Inherited Retirement Account (IRA): The survivor has the option to create a new account in their name, allowing them to take distributions based on their own life expectancy and avoid RMDs until age 73.
3. Delay taking distributions: The surviving spouse can delay required minimum distributions from the inherited IRA until after their deceased spouse’s required beginning date (RBD), which is generally age 70½.
4. Take lump sum distributions: If desired, the survivor can opt to take a full distribution of the inherited funds within one year following the deceased spouse’s death. The entire distribution would be taxed in the year it was received, and the survivor may want to consider tax planning strategies to minimize tax liabilities.
Non-spousal beneficiaries face different rules regarding distributions and taxes:
1. Required minimum distributions (RMDs): As mentioned earlier, non-spouse beneficiaries must distribute the inherited funds based on their own life expectancy using the Single Life Expectancy Table, leading to smaller RMDs compared to those calculated using the Joint and Survivor Life Expectancy Table used by spouses.
2. Tax implications: Although non-spouse heirs do not pay taxes on the inheritance until they begin taking distributions, their tax liability could be greater due to smaller required minimum distributions and lower overall account balances.
3. Estate planning strategies: To minimize tax liabilities, beneficiaries can consider transferring inherited assets to a trust, converting traditional IRAs into Roth IRAs using the inherited funds (known as a Roth conversion), or gifting assets to other family members. These strategies may depend on various factors, including the size of the inheritance, tax laws, and the beneficiary’s financial situation.
4. Considerations for inherited Roth IRA distributions: While non-spouse heirs are required to take distributions from inherited Roth IRAs, the funds remain tax-free as long as they adhere to the 10-year payout rule (explained below).
The SECURE Act and Non-Spousal Beneficiaries
Changes introduced by the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 significantly impacted how non-spouse beneficiaries handle their inherited retirement accounts:
1. Mandatory distribution rule for non-spouse heirs: As of January 1, 2020, non-spouse beneficiaries must empty their inherited traditional IRA or Roth IRA within ten years of the original account owner’s death. The term “ten-year rule” refers to this requirement.
2. Exceptions to the ten-year payout rule: A few categories of beneficiaries are exempt from the ten-year payout rule: disabled individuals, chronically ill individuals, and minor children (including adoptive, stepchildren, and grandchildren). Disabled or chronically ill individuals must be under 65 years old. Minors have until age 18 or, if younger, the end of the year they turn age 26 to begin distributing their inheritance according to the ten-year rule.
3. Required minimum distributions (RMDs): RMD rules for non-spouse beneficiaries remain unchanged in that they are required to take distributions based on their own life expectancy using the Single Life Expectancy Table. However, these distributions will be smaller as a result of shorter distribution periods. The ten-year payout rule applies to inherited Roth IRAs as well, meaning the tax advantages enjoyed by the original account owner persist for non-spouse heirs as long as they adhere to the 10-year rule.
4. Strategies for managing inherited IRAs post-SECURE Act: With these changes, beneficiaries must consider various strategies for managing their inherited IRAs efficiently and reducing tax liabilities. Some potential approaches include:
a) Structured distributions: Instead of taking evenly spaced annual withdrawals, beneficiaries could choose to take larger distributions in specific years when they have lower income or other financial obligations. This strategy can help manage their overall tax liability.
b) Converting inherited traditional IRA funds into a Roth IRA: In certain situations, converting inherited IRAs to Roth IRAs may be beneficial for tax reasons and to extend the payout period beyond ten years (though this is not mandatory).
c) Establishing trusts: Trusts can help manage distributions based on specific rules and objectives, offering tax benefits and asset protection. Beneficiaries should consult with estate planning professionals to explore trust options that fit their unique circumstances.
d) Considerations for inherited Roth IRAs: Non-spouse beneficiaries of inherited Roth IRAs will need to be aware of the 10-year payout rule and manage distributions accordingly while maintaining tax advantages for themselves and their heirs.
Impact of the SECURE Act on Non-Spousal Beneficiaries of Inherited IRAs
The SECURE Act of 2019 brought substantial changes to inherited IRAs for non-spousal beneficiaries. Prior to the Act, these individuals could manage their RMDs (Required Minimum Distributions) based on their own life expectancy, making tax burdens lighter in some cases. However, the SECURE Act introduced mandatory distributions with a ten-year payout rule for most non-spousal beneficiaries. This section will discuss these changes and strategies for managing inherited IRAs post-SECURE Act.
The 10-Year Rule for Mandatory Distributions
Before diving deeper into the topic, it’s important to clarify that the ten-year payout rule applies to most non-spousal beneficiaries except those falling under specific categories like disabled or chronically ill individuals, minors (direct descendants), and eligible designated beneficiaries. For these exceptions, the old distribution rules still apply, allowing them to use their own life expectancy to calculate RMDs.
For other non-spousal beneficiaries, the SECURE Act stipulates that they must empty inherited IRAs within 10 years of the original owner’s death. However, it is worth noting that there isn’t a specific timetable for these distributions; beneficiaries can choose to distribute funds annually or take a lump sum at the end of the ten-year period.
Strategies for Managing Inherited IRAs Post-SECURE Act
To help mitigate the tax impact and provide a more manageable distribution schedule, consider the following strategies:
1. Accelerated Distributions: Beneficiaries could choose to distribute larger amounts early on in the 10-year period, allowing them to minimize their IRA balances by the end of the first decade while keeping their tax liability lower throughout the process. This strategy is suitable for those with a shorter life expectancy.
2. Income Averaging: Beneficiaries can distribute funds evenly over ten years to maintain a consistent income stream and manage their taxes better. This strategy is ideal for individuals seeking predictable cash flows, as they’ll be able to plan their finances around the annual distributions.
3. Roth Conversions: Those who inherit traditional IRAs could consider converting all or some portion of the inherited funds into a Roth IRA within the 10-year payout period. This strategy offers tax-free withdrawals in retirement while allowing beneficiaries to spread taxes across ten years, making it an attractive option for those anticipating higher income levels in future years.
4. Tax Loss Harvesting: Non-spousal beneficiaries can sell securities within their inherited IRA that have declined in value to offset gains from appreciated stocks or other investments held outside the account. This strategy helps minimize tax liabilities while allowing them to maintain a well-diversified portfolio.
In conclusion, managing an inherited IRA following the SECURE Act’s changes requires careful planning and consideration of various strategies to optimize tax implications and ensure a sustainable income stream. While each situation is unique and calls for personalized advice, understanding the 10-year payout rule, distribution options, and tax-efficient strategies can help non-spousal beneficiaries maximize their retirement savings while adhering to the SECURE Act’s regulations.
Your Options as an Inherited IRA Beneficiary
As a beneficiary, you have several options when dealing with an inherited IRA. The type of beneficiary—spousal or non-spousal—determines the choices available to you. Understanding these options can help you manage your inherited IRA effectively.
1. Lump sum distribution
Spouses and non-spouse beneficiaries alike have the option to take a lump sum distribution of their inherited IRA. While this is a straightforward choice, it may not be the most tax-efficient or financially beneficial one for everyone. In the case of a traditional inherited IRA, you’ll be subject to income taxes on the entire amount distributed in the year received.
2. Disclaiming the inheritance
Disclaiming your inherited IRA might be an option if you don’t wish to handle the account or if there are other beneficiaries listed who may have a greater need for the funds. By disclaiming the inheritance, you’ll allow the remaining primary beneficiaries to inherit the assets instead. If no primary beneficiaries are named, the proceeds would go to the decedent’s estate or be distributed according to contract specifications.
3. Transferring the funds to your own IRA (for spousal beneficiaries only)
Spouses have the unique opportunity to roll over their inherited IRA into their own existing retirement account, as long as the distribution isn’t a required minimum distribution (RMD). This option offers several benefits: you can delay RMDs until reaching age 73, continue contributions to your own IRA, and maintain one unified account.
4. Setting up an inherited IRA (for spouses and non-spouse beneficiaries)
If you prefer not to transfer the funds into your existing retirement account or disclaim the inheritance, you can open a new inherited IRA in your name. This option allows you to manage your inherited assets as separate from your personal retirement accounts and provides more control over the distribution schedule. It’s essential to note that required minimum distributions (RMDs) are based on the deceased person’s age at the time of death, rather than yours when it comes to an inherited IRA.
Understanding your options as a beneficiary is crucial in making informed decisions about managing and distributing inherited IRA assets effectively. Depending on your situation and personal circumstances, one option might be more suitable than others. It’s always recommended to consult with a financial advisor or tax professional when navigating the complexities of an inherited IRA.
Comparing Inherited IRAs to Other Retirement Accounts
When discussing retirement accounts, it is essential to understand that each type has unique characteristics and regulations when it comes to inheriting them. While an inherited IRA is a widely known topic, it’s essential to differentiate between inherited IRAs and other types of retirement plans, specifically 401(k)s and other employer-sponsored plans.
An inherited IRA is a type of individual retirement account that arises when someone inherits assets from an individual or an employer-sponsored retirement plan after the original owner has passed away. This account is established in the name of the beneficiary, allowing them to manage and distribute funds based on the specific rules and requirements for inherited IRAs.
On the other hand, 401(k)s are employer-sponsored qualified defined contribution plans designed to help employees save for retirement. Like an IRA, contributions to a 401(k) are generally made with pre-tax dollars, which reduces taxable income in the year of contribution. However, unlike IRAs, employers may match a percentage of employee contributions, and these plans often include investment options provided by the employer.
When someone inherits a 401(k), they have several options: they can leave it untouched, roll it over to an IRA, or take a lump-sum distribution (subject to taxes). Inheriting a 401(k) often comes with additional complexities since the plan administrator must facilitate the transfer of funds. Moreover, 401(k)s may have different vesting schedules and distribution rules, depending on the specific terms of the retirement plan document.
It’s crucial to recognize that inherited IRA rules do not apply to 401(k)s and vice versa; they are separate entities with distinct regulations. Inherited IRAs are governed by IRS guidelines, while employer-sponsored plans follow ERISA (Employee Retirement Income Security Act) regulations. It is essential for beneficiaries to understand the differences and implications of each retirement account type in order to make informed decisions regarding their inherited assets.
In summary, inherited IRAs, 401(k)s, and other employer-sponsored plans all serve as valuable tools for individuals and families to save for retirement. However, it’s crucial to understand the unique features and complexities associated with each type of account when it comes to inheriting them. By gaining a thorough understanding of these distinctions, beneficiaries can make informed decisions regarding their inherited assets and maximize the potential benefits of each plan.
Maximizing Tax Efficiency with Inherited IRAs
Understanding the complexities of tax implications for an inherited IRA can be daunting, but utilizing various strategies can help mitigate your tax burden. Here we’ll discuss three primary tactics for optimizing taxes on withdrawals from inherited IRAs: tax-loss harvesting, Roth conversions, and income averaging.
1. Tax-Loss Harvesting
Tax-loss harvesting is an investment strategy that entails selling securities at a loss to offset gains in your portfolio, which can help minimize your overall tax liability. With inherited IRAs, this technique is particularly advantageous because the beneficiary typically has more control over the assets compared to inherited 401(k)s or other retirement plans.
When inheriting an IRA, you may want to consider liquidating securities that have declined in value to offset any gains realized from appreciated stocks, creating a net zero taxable event for the year. This strategy allows beneficiaries to maintain their desired asset allocation and minimize their overall tax burden while preserving the tax benefits of the inherited account.
2. Roth Conversions
Another tax-saving opportunity arises with inherited IRAs—the ability to perform a Roth conversion. As mentioned earlier, inherited IRAs can be either traditional or Roth depending on the type of IRA originally owned by the deceased person.
Roth conversions enable beneficiaries to convert their inherited traditional IRA assets into Roth IRA funds, which offers several tax advantages. This strategy allows you to pay taxes upfront when converting and eliminates future required minimum distributions (RMDs). While a Roth conversion from an inherited account may be more complex than one from an owned account, it can lead to significant long-term savings for beneficiaries who anticipate being in a higher tax bracket down the line.
3. Income Averaging
Income averaging is another tax strategy that can help minimize your overall tax liability when dealing with inherited IRAs. By strategically distributing assets from an inherited IRA over multiple tax years, you can lower your overall tax burden by spreading out income into years where your income level is lower.
For instance, if the deceased account owner left an inherited IRA to their beneficiary, who anticipates a significant increase in income during the next few years, it may be advantageous for the beneficiary to distribute the funds over multiple tax years using the IRS’s 60-month payout rule. This strategy can help minimize taxes owed and maximize tax efficiency by spreading out distributions across multiple tax years based on your current income level.
In summary, inherited IRAs present unique tax challenges that can be navigated with careful planning and strategic implementation of various tax optimization strategies like tax-loss harvesting, Roth conversions, and income averaging. Consulting with a financial advisor can help you determine the best approach for your specific situation to minimize taxes and maximize long-term benefits for your inherited IRA.
FAQs about Tax Efficiency Strategies for Inherited IRAs:
1. Can I apply tax-loss harvesting in an inherited IRA?
Yes, tax-loss harvesting is possible with an inherited IRA and can help minimize your overall tax liability. Selling securities that have declined in value to offset gains in your portfolio can create a net zero taxable event for the year.
2. When is it best to perform a Roth conversion from an inherited IRA?
Determining the optimal time for a Roth conversion depends on several factors, including beneficiary’s income level and expected future tax bracket. Consulting with a financial advisor can help you determine the right time for this strategy.
3. How does income averaging benefit me with an inherited IRA?
Income averaging allows you to strategically distribute assets from an inherited IRA over multiple tax years. This strategy can help minimize taxes owed and maximize tax efficiency by spreading out distributions across multiple tax years based on your current income level.
FAQs About Inherited IRAs
1. What is an inherited IRA?
An inherited IRA, also known as a beneficiary IRA, is an account opened when someone inherits an IRA or employer-sponsored retirement plan after the original owner passes away. The individual who inherits the retirement account (the beneficiary) may be anyone – a spouse, relative, unrelated party, or entity like an estate or trust.
2. What is the difference between inherited and regular IRAs?
An inherited IRA differs from a regular IRA as it represents funds that are transferred to another person following the original account holder’s death. The primary difference lies in rules regarding distributions, tax implications, and ownership.
3. How does one open an inherited IRA?
To open an inherited IRA, you must transfer assets from the deceased person’s IRA into a new account under your name as a beneficiary. You cannot contribute additional funds to this type of account.
4. What forms are required for tax reporting on an inherited IRA?
IRS Form 1099-R and 5498 must be reported for tax purposes when dealing with an inherited IRA, whether traditional or Roth.
5. Are inherited IRAs subject to taxation?
Yes, inherited IRAs are subject to taxation. The tax implications vary depending on whether it is a traditional or Roth IRA and the age of the beneficiary.
6. Can spousal beneficiaries roll over inherited funds into their own IRAs?
Spouses can roll over inherited funds from their deceased spouse’s retirement accounts into their existing individual retirement accounts, allowing them to defer RMDs until reaching the mandatory distribution age of 73.
7. What is the difference between required minimum distributions (RMDs) for spousal and non-spousal beneficiaries?
Spousal beneficiaries can calculate their RMDs based on their life expectancy, while non-spouses must distribute the entire amount within a ten-year period following the deceased owner’s death, except under certain circumstances. The SECURE Act changed these rules, so it’s essential to understand the differences.
8. What are the distribution options for inherited IRAs?
Distributions may be taken as lump sums or spread over time using RMDs based on your life expectancy if you are a spousal beneficiary, while non-spouses have limited distribution options depending on their status.
9. Can I disclaim an inherited IRA?
Yes, inheritors can choose to disclaim their share of the inherited IRA if they do not wish to accept it. Disclaimed assets are then distributed according to the original account owner’s estate plan.