Inherited IRA Q's

[onetruething]

My siblings and I inherited an IRA from a non-spouse. We are all in good financial shape. Is it possible for us to just split up the shares between the siblings and turn it into individual ira's instead of cashing it out? I've hired an advisor, but just wondering if anyone here has experience with this?
Thank you!

[ohgillian]

Dec 22, 2021 12:04:50 GMT -5 onetruething said:

My siblings and I inherited an IRA from a non-spouse. We are all in good financial shape. Is it possible for us to just split up the shares between the siblings and turn it into individual ira's instead of cashing it out? I've hired an advisor, but just wondering if anyone here has experience with this?
Thank you!

I've been through this!

The institution that holds the IRA should work with you to split it into 3 separate inherited IRAs based on whatever the percentages are (like if everyone gets 25% or everyone gets 33.3% or whatever.)

You do not have to continue to hold the IRA at that institution, but they are the one who will establish the separate new inherited IRA accounts for you.

Then you can transfer it to whatever institution you already use, if you want.

Because of law changes a few years ago, you almost certainly have to cash it out over 10 years -- you used to get to keep it forever other than having to take a required minimum distribution. You'd definitely want to work with your advisor -- make sure you hired someone who is a fiduciary. They should be able to help you look at your overall financial situation and cash it out in amounts that make the most sense, tax wise. In other words, you don't have to do it at a rate of 1/10 per year unless you want to. You'll owe taxes on the cash out, and the basis for the IRA's contents will be their value on the date of death.

Feel free to ask me if you have questions. I inherited an IRA about 6 years ago and my comments are all based on that experience.

[onetruething]

Thank you this is extremely helpful to me!!!

[onetruething]

I may come back with other questions!!

[orval]

Yes! My sister and I intherited my mom's traditional and roth. We were both listed as beneficiaries. It is a process and lots of forms, but not too difficult. I transferred my portion to Vanguard (think it was Wells Fargo originially) into an Inherited IRA. You will have to take RMD's each year. Vanguard calculated the correct amount -- I reinvested in brokerage account instead of taking cash. I also had taxes taken out since you will have to pay taxes on the RMD.

[imojoebunny]

This is why wills are important, but I think what people have said is true. You can split it between heirs, and take it over X number of years, it use to be 5. Your taxes will depend on your total income. We have some sort of trust that will make ours be distributed over a longer period of time, lowering the tax bill, but it, also, includes 401K, so the IRA part might not part of that deal, since it is much smaller part of our stuff. If you are married, and this is an inheritance, I would consider keeping it separate because in the event of divorce, in many states, that would not be considered marital property, as long as, it remains separate. My condolences on the loss of your loved one.

[letsgetweird]

Dec 23, 2021 23:44:49 GMT -5 imojoebunny said:

This is why wills are important, but I think what people have said is true. You can split it between heirs, and take it over X number of years, it use to be 5. Your taxes will depend on your total income. We have some sort of trust that will make ours be distributed over a longer period of time, lowering the tax bill, but it, also, includes 401K, so the IRA part might not part of that deal, since it is much smaller part of our stuff. If you are married, and this is an inheritance, I would consider keeping it separate because in the event of divorce, in many states, that would not be considered marital property, as long as, it remains separate. My condolences on the loss of your loved one.

This is actually why assigning a beneficiary on your financial accounts is important so you don't have to go to probate.

[onetruething]

Dec 23, 2021 23:44:49 GMT -5 imojoebunny said:

This is why wills are important, but I think what people have said is true. You can split it between heirs, and take it over X number of years, it use to be 5. Your taxes will depend on your total income. We have some sort of trust that will make ours be distributed over a longer period of time, lowering the tax bill, but it, also, includes 401K, so the IRA part might not part of that deal, since it is much smaller part of our stuff. If you are married, and this is an inheritance, I would consider keeping it separate because in the event of divorce, in many states, that would not be considered marital property, as long as, it remains separate. My condolences on the loss of your loved one.

Thank you. It was part of a trust and we can take it over 10 years. I guess where I was confused was that I thought we had to keep it as one inherited IRA and just withdraw over the 10 years. I'm thrilled to hear we can separate it out sooner and still take distributions over the 10 year period. I am definitely keeping this separate from my spouse so I appreciate you affirming that!!