By Joe Cicchinelli, IRA Technical Expert
Follow Me on Twitter: @JoeCiccEdSlott
Are you inheriting an IRA? Here is a quick checklist for you. This list is designed for individuals who inherit as named beneficiaries. Some items will be different for a spouse beneficiary or if an estate or a trust inherits an IRA.
- DON’T Distributions payable to you are fully taxable. They cannot be put into another IRA.
- DO The inherited account should be retitled. It should retain the name of the account owner. Example: John Smith, deceased, IRA fbo (for benefit of) Mary Jones
- DO Funds can be moved to another inherited IRA account but only as a direct transfer – i.e. the funds go directly from one IRA custodian to another or a check payable to the new IRA custodian is issued.
- DON’T Some IRA custodians may not offer a direct transfer option. Again, any checks payable to you will be taxable and cannot be put into another inherited IRA.
- DO You have required distributions beginning in the year after the account owner’s death – regardless of your age. Those distributions will be taxable to you but they are not subject to the early distribution penalty.
- DON’T You cannot contribute your annual IRA contributions to the account.
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