Episode 52: 3 Things To Know About Inherited IRAs

Today’s Prep:

Did you recently inherit an IRA? What rules do you need to know and what options do you have in order to make the best decision for you and your family?

(Click the featured times below to jump forward in the episode)

Equipping Points:

When it comes to inherited IRAs, there is a lot of flexibility and options on how to receive that money. How do you know what option is best for you? And what kind of tax liability will you face?

Let’s start first by reviewing IRAs and how they work. When you put money into an IRA you get a tax deduction in that year and then the money grows tax-deferred over time. After age 59 and a half, you can pull the money out, but you’ll have to pay the tax on that money. Once you turn 70 and a half, you have to take money out of the account, which is called required minimum distributions.

But what about if you inherit an IRA?

If you inherit an IRA from a spouse, you can get a spousal rollover. It’s a simple process to tell the custodian to put it in your name. Then, you treat it as your own IRA from the beginning.

When you inherit an IRA from another family member (not a spouse) or someone else the process changes. How you receive or transfer the original IRA to you can have significant tax implications. You may want the lump sum of the money or you may want to turn it into a beneficiary IRA. You’ll want to make sure to manage the tax liability on the IRA, which can weigh heavily into your decision. Remember that an inherited IRA has RMDs even before you turn 70 and a half.

Then what happens if you inherit an IRA that was already once inherited before you? The structure of the inherited IRA is then passed down with the RMDs based on the previous inherited IRA holder.

You have a lot of choices when it comes to an inherited IRA, so it’s important to understand the different options and what it means for you and even what it means for those who may inherit it after you. On this episode of Cover Your Assets KC, David Dickens talks us through some of those options so you better understand what to expect and then what to do with an inherited IRA.

Listen to the full episode or click on the timestamps below to hear more about a specific topic.

[1:22] – What do you need to know about a normal IRA?

[2:48] – What if you inherit an IRA from a spouse?

[3:47] – What happens with an inherited IRA from a parent or family member?

[5:14] – How to create a beneficiary IRA.

[6:06] – What are the RMDs on an inherited IRA?

[9:03] – Is it possible to inherit an already inherited IRA?

[11:45] – The SECURE Act proposed limits on inherited IRAs to a maximum of 10 years.

Today’s Takeaway:

Additional Resources:

PODCAST: 4 Reasons Why You Might Benefit From Roth Conversions

PODCAST: How to Plan For Receiving An Inheritance In Retirement



More From David:

The host: David Dickens

Sign up for our weekly email newsletter:

We are an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives.

Investment advisory services are offered through Brookstone Capital Management LLC, an SEC Registered Investment Advisor. Kansas City Financial Advisors and Brookstone Capital Management LLC are separate companies.

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. None of the information contained on this website shall constitute an offer to sell or solicit any offer to buy a security or any insurance product.

Any references to protection benefits or steady and reliable income streams on this website refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by insurance company. Annuities are not FDIC insured.

The information and opinions contained in any of the material requested from this website are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. They are given for informational purposes only and are not a solicitation to buy or sell any of the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

Privacy Policy | Terms of Use

Call Now Button