ROB D CPA, Inc.-Financial Friday- Inerited IRA

The loss of a loved one is hard.  So much to think about, so many things to do, how do you know what is right, it can all be very stressful.

Read this over and keep it in your back pocket so when/if the time comes you may have to make a decision like this you have information on your side.
 

Inherited IRA: What Choice to Make?

1. Roll over the inherited assets into your own Tradition IRA.

The benefit of this is that both the amount and the timing of minimum required distributions (MRD) are based on your own age

This is beneficial if:

• If you are younger than your spouse and your spouse died after age 70.5 
•  Older than 59.5 or you do not need access to these assets until you reach age 59.5

2.               Transfer your inherited assets to an Inhered IRA.

This is beneficial if you are not concerned about creditor protection issues and are:

• Older than your spouse and your spouse died before age 70.5
• Younger than age 59.5 and you need to access these assets immediately

3.               Roll over and convert inherited IRA assets to your own Roth IRA.

• This is most likely to be advantageous if you expect higher taxes in retirement and you can afford to pay the taxes with funds from other sources
• This option has potential for tax-free growth of assets and no MRDs during lifetime of the original owner
• Taxes will need to be paid on the amount converted from the non-Roth IRA into the Roth IRA

4.               Disclaim all or part of your inherited assets

This is beneficial in the following situations:

• You don’t need all or some of these assets and you’d like a younger beneficiary to be able to maximize the potential for tax-deferred growth by stretching distributions out over his or her lifetime
• The decedents estate was not structured ideally for tax purposes

5.               Leave the assets in the plan.

• If you inherited a workplace savings account, the plan from which you are inheriting assets may allow you to leave those assets in the plan

Details vary by plan so it is important to discuss and know your plan in advance.  As always keep copies.