6 Critical Questions to Ask When You Inherit an IRA, Ep #197

So, you inherited an IRA–now what?

In this episode, you’ll learn the three types of beneficiaries and the six questions you need to ask yourself when you inherit an IRA.

The rules surrounding inherited IRAs are more complicated than you think, so If you have already inherited an IRA or expect to in the near future, we are breaking down how you should think about making withdrawals.

Outline of This Episode

  • [0:48] Inherited IRAs relate to summer concerts
  • [5:30] Questions to ask yourself about the inherited IRA
  • [13:59] Non-eligible designated beneficiaries
  • [19:40] Surviving spouses have special designations
  • [22:20] A quick summary

You can no longer take all the time you’d like to withdraw an inherited IRA

Gone are the days of the stretch IRA when you could extend the withdrawal amounts from an inherited IRA over your lifetime. With the Secure Act, there are additional rules and regulations that can be rather confusing especially if you are unfamiliar with them.

The Secure Act created three different types of beneficiaries for inherited IRAs which is why it is important to understand which category you fall under as an heir. Listen in to learn the types of beneficiaries and why and how that matters.

Avoid extra taxes and penalties–learn the rules surrounding inherited IRAs

Inherited IRAs aren’t like the ones you set up yourself: the rules are different and they have an added level of complexity. You may feel the desire to roll over the inherited IRA into your own IRA account. However, you may not want to do this.

If you’re not careful when you draw them down, you could end up with stiff penalties or a major tax hit.

If you have recently inherited an IRA you’ll want to pay careful attention to this episode and maybe even seek professional advice. You only have one opportunity to get this right, so it’s important to understand the questions to ask yourself.

6 questions to ask yourself if you have inherited an IRA

If you have inherited an IRA you’ll need to ask yourself some questions before you can understand how to draw down the money so that you don’t get penalized and you don’t have to overpay on taxes.

  1. Were you a named beneficiary or did you receive the IRA after probate? It is important to determine the type of beneficiary that you are since there are major differences between named and unnamed beneficiaries. If you were not named as a beneficiary you’ll be subject to to a few more rules and regulations. Listen in to discover why this matters and how the selected beneficiaries receive preferential treatment.
  2. Who are the other beneficiaries?
  3. Are there contingent beneficiaries?
  4. Do you need the money now or would you prefer to access it later?
  5. What is your tax bracket today what do you expect it to be over the next 10 years?
  6. What age was the account owner when they passed away?

Make sure to take the time to get this right because there are no do overs when it comes to inheriting an IRA. You don’t want to be stuck with extra fees and taxes. Listen in to learn the best ways to use the tax structure of the inherited IRAs to your advantage.

Resources & People Mentioned

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