{"id":6188,"date":"2022-10-10T08:00:00","date_gmt":"2022-10-10T12:00:00","guid":{"rendered":"https:\/\/www.whitcomb.com\/?p=6188"},"modified":"2022-10-06T14:36:25","modified_gmt":"2022-10-06T18:36:25","slug":"understanding-inherited-iras","status":"publish","type":"post","link":"https:\/\/www.whitcomb.com\/blog\/2022\/10\/10\/understanding-inherited-iras\/","title":{"rendered":"Understanding Inherited IRAs"},"content":{"rendered":"\n<p>The rules around Inherited IRAs changed in 2019 with the passage of the Secure Act. Regulations released in 2022 outline the process, and the choices a beneficiary has are now a little more complex. I hope this will help you determine what rules apply to your situation, and decide the best choice for you.<\/p>\n\n\n\n<p>Essentially, you need two pieces of information: your connection to the IRA owner, and their age when they passed away. The IRS classifies beneficiaries based on their relationship to the deceased.<br><\/p>\n\n\n\n<ul><li><strong>Eligible Designated Beneficiary<\/strong> \u2013 You fall into this category if you are:<ul><li>The spouse of the deceased<\/li><li>A minor child of the deceased<\/li><li>Less than 10 years younger than the deceased (often a sibling or friend)<\/li><\/ul><\/li><li><strong>Designated Beneficiary <\/strong>\u2013 Anyone who does not fall into any of the above categories. For example, an adult child of the deceased.<\/li><\/ul>\n\n\n\n<p>The second piece of information you need is whether the IRA owner had started taking Required Minimum Distributions (RMDs). This is based on age. Currently, RMDs begin at age 72.<\/p>\n\n\n\n<p>Another important note: There is a \u201c10-Year Rule\u201d that says all funds must be distributed within 10 years of the IRA owner\u2019s death. Failure to do so will result in a 50% penalty for any funds still in the account. Read on to determine when this rule applies to you.<\/p>\n\n\n\n<p>Now, let\u2019s talk about your options.<\/p>\n\n\n\n<p><strong>Eligible Designated Beneficiary<\/strong><\/p>\n\n\n\n<p><em>If you are an adult, and the IRA owner was under 72 when they passed, you have two options:<\/em><\/p>\n\n\n\n<p>You can start taking RMDs over your life expectancy. (The 10-Year Rule does not apply in this case.)<\/p>\n\n\n\n<p>You can leave the funds in the account, and access them any time penalty-free, but you must<br>follow the 10-Year Rule.<\/p>\n\n\n\n<p><em>If the IRA owner was 72 or over<\/em> \u2014 You must continue to take RMDs and the 10-Year Rule applies. <\/p>\n\n\n\n<p>But what if the Eligible Designated Beneficiary is a minor? Their options are the same, but the 10-Year Rule is paused: it begins when they legally become an adult.<\/p>\n\n\n\n<p><em>Special Option for Spouses<\/em> \u2014 If you are inheriting your spouse\u2019s IRA, you have a third option: roll the Inherited IRA into a new IRA in your own name.<\/p>\n\n\n\n<ul><li>Advantage: Funds have no withdrawal rules or requirements until you reach age 72.<\/li><li>Disadvantage: If you are under 59 \u00bd, taking funds from your IRA will incur an earlydistribution penalty of 10%.<\/li><\/ul>\n\n\n\n<p><strong>Designated Beneficiary<\/strong><\/p>\n\n\n\n<p><em>If the IRA owner was under 72 at the time of death:<\/em><\/p>\n\n\n\n<p>You can distribute any amount of funds penalty free at any time, or you can leave the funds in the account if you choose. But the 10-Year Rule applies: everything must be distributed within 10 years.<\/p>\n\n\n\n<p><em>If the IRA owner was 72 or over<\/em> \u2014 You must continue to take RMDs and the 10-Year Rule applies.<\/p>\n\n\n\n<p>Like I said at the beginning, it\u2019s a bit complex. But don\u2019t worry! We\u2019re here to help you sort out what option is best and make sure you\u2019re avoiding any potential pitfalls. If you still have questions, let\u2019s talk.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The rules around Inherited IRAs changed in 2019 with the passage of the Secure Act. Regulations released in 2022 outline the process, and the choices a beneficiary has are now a little more complex. I hope this will help you determine what rules apply to your situation, and decide the best choice for you.<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"post_statement":"","post_description":"","post_cta":"","post_button":"Read More","post_button_url":"","compliance_id":"","post_disclaimer":"","footnotes":""},"categories":[46],"tags":[248,249],"acf":[],"_links":{"self":[{"href":"https:\/\/www.whitcomb.com\/wp-json\/wp\/v2\/posts\/6188"}],"collection":[{"href":"https:\/\/www.whitcomb.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.whitcomb.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.whitcomb.com\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/www.whitcomb.com\/wp-json\/wp\/v2\/comments?post=6188"}],"version-history":[{"count":1,"href":"https:\/\/www.whitcomb.com\/wp-json\/wp\/v2\/posts\/6188\/revisions"}],"predecessor-version":[{"id":6189,"href":"https:\/\/www.whitcomb.com\/wp-json\/wp\/v2\/posts\/6188\/revisions\/6189"}],"wp:attachment":[{"href":"https:\/\/www.whitcomb.com\/wp-json\/wp\/v2\/media?parent=6188"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.whitcomb.com\/wp-json\/wp\/v2\/categories?post=6188"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.whitcomb.com\/wp-json\/wp\/v2\/tags?post=6188"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}