Inherited IRA

[memenee]

Does anyone have experience with these? I’m reading about it online and my head is spinning.

If anyone knows where I can find “inherited IRAs 101” or can share with me the basics it would be greatly appreciated. Thanks!

[momabear]

I have been dealing with these since the winter. I still don’t totally get it, but the companies that held the accounts were very helpful in setting everything up and explaining it to me. Fidelity was better than Vanguard for answering questions and walking me through the rules.
From what I have learned, once you open an inherited IRA, you have to empty the account within 10 years. You can do it all at once or spread it out based on what works for you tax-wise. The other thing is if you keep the inherited account, you are required to take the required minimum distribution each year even if you aren’t of age, if the deceased person was.
I am no expert. This has just been my experience. Hopefully someone else can fill in the gaps.

[liveintheville]

My FIL left my H an inherited IRA. We have to take annual withdrawals from it. Our financial advisor just reinvests it in IRA s in our names. You don’t have to reinvest it in retirement but we do.

[ohgillian]

I have an inherited IRA. Mine was inherited before the SECURE Act 2.0 changed the rules; so now as momabear said you do have to empty it within 10 years. I take an RMD annually from mine; vanguard calculates it but it’s not hard to calculate if you want that info. I don’t know what else to share, do you have any specific questions?

[memenee]

Thank you. So I guess it acts like a traditional ira but I can’t keep it more than 10 years? Within 10 years I have to liquidate and put the money elsewhere?

I will get a tax person but out of curiosity what are the tax ramifications? Like is there a benefit to leaving it as an IRA for the full 10 years? My portion will be worth around $300k I think if that matters, but not sure . Thank you!

[Poppy]

There is an advantage to taking it out over time because it's taxed as income. If you take out $300k in one year you'll likely pay more because some of it will go into higher tax brackets.

[Poppy]

And yeah, it's kind of a PITA to deal with. The brokerage where mine was has been moderately helpful when I call but there was a lot of paperwork and all the guides have a bunch of if/then disclaimers because the rules vary depending on a lot of factors (your relationship to the decedent, age of the decedent and whether they were taking RMDs, etc).

The company first split the account between the beneficiaries after I provided the necessary documentation and distributed last year's RMD. Then they created a new Inherited IRA at their institution for me. It is supposedly more complicated to skip that step and roll it to a new institution directly, although now I can roll it over any time I want.

[memenee]

Poppy thank you! This was helpful and I’m glad to know I’m not the only one who thinks this is complicated!

[ohgillian]

OP, I’m realizing that we are all assuming that this is it a traditional IRA not a Roth. You will want to confirm which it is because there are big differences in terms of taxes and I think maybe also RMDs.

[quesyrah]

We’ve been through this twice. When DH’s dad died and when my parents died.

In my experience, it’s very easy to deal with. In both cases our parents were retired and already receiving distributions. We both opened new IRAs to roll the funds into.

With DH’s dad died we bought a minivan and got a check from the IRA every month to make the payment. DH is an only child and was the sole beneficiary.

When my parents died I rolled the funds into my newly established IRA then cashed it out in lump sum to distribute to my siblings. I had taxes withheld before receiving the check.

In neither scenario did it affect our taxes which was my concern.