Whether you recently inherited an IRA or are advising someone else about how to handle inherited assets, there are many free resources available online to guide you through the rules applicable to inherited IRAs. Failure to comply with applicable rules and deadlines regarding inherited IRAs can have costly tax consequences. Therefore, as soon as you receive any news that you may be inheriting a retirement account, it is a good idea to get a quick overview of inherited IRA rules, even though you will probably need to review them again after you have more detailed information about your inheritance.
One of the best resources available on inherited IRA's is IRS Publication 590-B Distributions from Individual Retirement Arrangements. Their publication provides detailed information for U.S. taxpayers about rules that apply to inherited IRAs. For example, it explains when you must make withdrawals from an inherited retirement account. It also provides information on taking distributions from an IRA. To view their free publication, go directly to the IRS website and search for Internal Revenue Service Publication 590-B.Financial services firms such as brokerage firms, mutual fund companies, and insurance companies also provide free information about how to manage an inherited IRA or retirement plan account. Contact the firm that holds your retirement account for more information.Copyright 2020 Pennyborn.com. ALL RIGHTS RESERVED.Updated March 17, 2020.
What To Do If You Inherit An IRA
Starting in 2020, new rules apply to inherited IRA's if the IRA account owner died after December 31, 2019. As a result of enactment of The Setting Every Community Up For Retirement Enhancement Act, also known as The SECURE Act, there are several changes to the rules applicable to an IRA you inherit. For example, the new law contains provisions requiring that all distributions must be made from the account by the end of the tenth year after the death of the account owner, except for distributions made to certain eligible designated beneficiaries. To determine the distribution requirements for a particular inherited IRA, you will need to know the type of beneficiary involved and the rules applicable to that type of beneficiary.Inherited IRA rules vary, depending on a variety of factors, such as your relationship to the deceased IRA owner. For example, one set of rules applies if you are the surviving spouse and another set of rules applies to children of the decedent and other non-spouse beneficiaries. See heirs and beneficiaries.Due to the myriad of changes that recently went into effect for IRA's and retirement plan accounts as a result of The Secure Act, it is critical that you get advice from a licensed financial advisor, tax professional or attorney about the rules that apply to the specific IRA and the specific account owner or beneficiary involved. For more information on the rules that apply to an inherited IRA, refer to our Inherited IRAs
page.Also, because IRA's may contain invested assets such as stocks, bonds, ETFs, mutual funds, commodities, and real estate, it is important to consult a financial advisor and Find a Tax Professional promptly upon inheriting an IRA. Failure to properly manage these types of investments can lead to significant losses because the value of such assets can change daily. For example, if you are forced to take a distribution from an IRA due to applicable IRA rules but have your account invested in assets that have lost value because of market volatility you may not want to take the distribution at that time due to the losses. By consulting with a financial professional you may be able to plan in advance for required distributions from your IRA to avoid these types of issues.For tips on how to find a qualified financial planner or other financial professional, review our financial planning section.
INFORMATION ON THIS SITE, INCLUDING ARTICLES, ESTATE PLANNING FORMS, AND THE ESTATE PLANNING BLOG, DOES NOT CONSTITUTE LEGAL, FINANCIAL OR TAX ADVICE. Pennyborn.com is not a law firm and is not a substitute for a lawyer. Your use of this site does not create an attorney-client relationship. Information on this site is for educational purposes only and may not be accurate, complete or up to date.
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