Svete & McGee Attorneys at Law

Beware of Pitfalls of Inherited IRA’s

33212194_sGenerally, withdrawals from an IRA may be made at age 59 1/2 and mandatory withdrawals (RMD) must begin at age 70 1/2 (RMD). More pitfalls arise with inherited IRA’s, for example:

  • If you inherit an IRA from anyone other than your husband/wife, you cannot roll it over into your own IRA. Instead, you have to retitle the IRA so it is clear that the owner died and you were the beneficiary.
  • Also, if you move the account to a new IRA custodian, be sure you do a “Trustee to Trustee Transfer.” However, if the check is made out to you and you are not the surviving spouse, the IRS will consider this “a total distribution” subject to tax, effectively ending the IRA.
  • The withdrawal from an inherited IRA must be taken on or before December 31st of the year following the year of the owner’s death.

It is important that you consider as paying the distribution across your life expectancy. This is particularly important if you have many more years to live. That way the IRA account can increase in value while taxes are deferred.

Fortunately with Roth IRA’s, there are no required minimum distributions. However, heirs to Roth IRA accounts are required every year to withdraw minimum amounts, specified by IRS or pay a 50% penalty. Fortunately, there’s no tax due on those required withdrawals of the Roth IRAs.

If you have additional questions, please contact your IRA custodian, accountant or us.

Joe Svete

Highly Rated Ethical Standards and Professional Legal Ability

Svete & McGee Co., LPA 100 Parker Court, Chardon, Ohio 44024-1141 Map
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