Inherited Ira

IRA stands for Individual Retirement Account. Inherited IRA is that account which is left to a beneficiary when its owner dies. The IRA beneficiary is designated by the account holder and can be spouse or non-spouse.

A beneficiary, whether spouse or non-spouse, has the option of transferring assets into an inherited IRA after the death of the account holder. The withdrawal of funds depends on whether the original account holder had reached his/her Required Beginning Date (RBD).

It might be a case that the owner had already begun receiving the Required Minimum Distributions (RMDs) at the time of his or her death. In such cases the beneficiary must continue to receive the amount or submit a new schedule which would be suitable for his/her lifestyle.

There's another case that the owner might not have chosen an RMD schedule or might have died before 70.5 years of age. In such cases, the beneficiary has a five year window to withdraw the funds. The withdrawal of these funds will be subject to income taxes.

One of the differences between an IRA inherited by the spouse and the one by someone else is that the spouse can roll over the inherited IRA to his/her existing IRA accounts with no penalties. This option is not available for non-spouse beneficiaries.

The IRAs are relatively new. The tax laws that surround the inherited IRAs are complicated. It is always advised for a beneficiary to seek advice of a tax professional in case they inherit an IRA.