Inherited IRA aka: Beneficiary IRA
An Inherited IRA is an individual retirement account (IRA) that is left to a beneficiary after the owner’s death and usually are received from a parent, but can be from anyone other than your spouse.
IRAs are among the largest assets left to beneficiaries. Since Inherited IRAs are specifically designed for IRA beneficiaries, they offer an opportunity to continue tax-deferred growth of inherited assets. Generally speaking it is better to leave the money within the IRA as long as possible to continue the deferred taxation status.
Losing a loved one can be an incredibly difficult time, and having to deal with financial issues during this hard time is something none of us want. But the question remains: What should I do with an Inherited IRA? Since the responsibility is now yours… as in the earnings and future payouts now belong to you along with the taxes due are now your responsibility as well. A couple options you will need to consider are:
- Close the account and take the money in a lump sum. Keep in mind, if you do so you will owe taxes immediately.
- Roll the inherited IRA over into your own IRA, if that turns out to be a possibility for you to do, it would be the more efficient option.
As the beneficiary your options will vary depending on the status of the inherited IRA and generally depend on whether the IRA owner dies before or after April 1st of the year following the year in which he or she turned age 70½.
Since this can be very confusing it is best to have some guidance from a qualified advisor before making such decisions.
Note: This blog is designed for general information purposes only. All information presented on this site should not be interpreted as legal advice and the author assumes no responsibility or liability for the actions taken or not taken by the readers based upon such information. For legal and tax advice contact your attorney or tax adviser.
Rita Sollie, Direct Insurance Representative with North Coast Life Insurance Company (NCL). No gimmicks or schemes here, just genuine and honest service. We don’t sell insurance, we solve problems. I welcome the opportunity to show you what NCL can do for your Life Insurance and Financial needs.
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