Inherited IRA

What is an Inherited IRA?

An Inherited IRA, also called a Beneficiary IRA, is an IRA opened when someone inherits an IRA or employer-sponsored plan from a deceased benefactor, typically a family member. Unlike other IRAs, you can't make additional contributions, but the funds maintain tax-deferred and you can usually withdraw the assets penalty-free immediately after inheriting the account.

Spouses do not typically deal with Inherited IRAs, as they can transfer assets from their spouse directly into other retirement accounts.

Required Minimum Distributions or full distribution rules depend on your classification of beneficiary:

• Eligible Designated Beneficiary: spouse or minor child of the original account holder or an individual who is disabled, chronically ill, or no less than 10 years younger than the original account holder
• Designated Beneficiary: most other individuals
• Non-Designated Beneficiary: organizations, trusts, and nonprofits

Sometimes rules are changed based on factors like the exact relationship with the deceased, when they died, or their age when they died.

After the passage of the SECURE Act, many factors affecting the rules of Inherited IRAs have changed. We recommend you contact us directly with questions regarding Inherited IRAs, particularly if the deceased passed after January 1st, 2020.