Inherited Traditional IRA Rules for Spouses. The IRS lists three options for spouses who inherit a traditional IRA. If that’s you, the first option is to designate yourself as the account owner. You’ll put the account under your name (also known as “retitling”). This way, the account is yours to contribute or withdraw from.
Can a spouse roll an inherited IRA into their own IRA?
(If you inherited an IRA from your spouse different options apply.) Many people think they can roll an inherited IRA into their own IRA. Unfortunately, if you inherited an IRA from someone who is not your spouse you cannot roll the account into your own IRA or treat the IRA as your own.
Can a beneficiary transfer money from an inherited IRA?
As a beneficiary, you can transfer the money from any type of IRA to a new inherited IRA in your name. Note that the SECURE Act changed IRA rules in 2019, and now non-spouse beneficiaries must take money out of the account within 10 years of the owner’s death. The IRS lists three options for spouses who inherit a traditional IRA.
Can a spouse be the beneficiary of an IRA?
A beneficiary’s relationship to the deceased and when he or she inherited the IRA will determine exactly what those options are. The first thing to understand is that IRA inheritance rules differ depending on whether the beneficiary is a spouse or non-spouse.
Can a beneficiary of an inherited IRA take a distribution?
IRA assets can continue growing tax-deferred. If you are under 59½ you’ll be subject to the same distribution rules as if the IRA had been yours originally, so you cannot take distributions without paying the 10% early withdrawal penalty—unless you meet one of the IRS penalty exceptions. You may designate your own IRA beneficiary.
When to roll over an inherited IRA into your own IRA?
Under the inherited IRA rules, spouses can choose to roll the assets over into their own IRAs so that they will not have to begin taking required minimum distributions before they reach age 70 1/2, which might help them to avoid being pushed into a higher tax bracket and being forced to pay more tax on an inherited IRA.
What happens when you cash out an inherited IRA?
This is known as an “inherited IRA.” You could immediately cash out traditional or Roth IRAs through a lump sum distribution. With traditional IRAs, withdrawals are taxable income. However, withdrawals from Roth IRAs (as long as the account was open for at least five years) are tax-free.
