For a surviving spouse under age 59 and 1/2, keeping the IRA as an inherited IRA for your benefit may make the most sense. If you may need the funds, you’ll only be subject to ordinary income taxes – NOT the 10% early withdrawal penalty! Keeping the assets in an inherited IRA may lead to additional required distribution complications however.
Can a spouse be a beneficiary of a traditional IRA?
Beneficiaries of a retirement account or traditional IRA must include in their gross income any taxable distributions they receive. IRA Beneficiaries Inherited from spouse. If a traditional IRA is inherited from a spouse, the surviving spouse generally has the following three choices:
When do nonspouse Inheritors have to withdraw money from Ira?
In the case of a nonspouse inheritor, RMDs are generally required to begin in the year after the year of death. The SECURE Act requires beneficiaries to withdraw all assets from an inherited IRA or 401 (k) plan by December 31 of the 10th year following the IRA owner’s death.
Can a beneficiary IRA be transferred into an inherited IRA?
When a traditional IRA is transferred into an inherited IRA, sometimes also referred to as a beneficiary distribution account, there are RMD rules to follow, set by the IRS. Your options for taking distributions from the IRA are based on when the original IRA owner died.
Who is the beneficiary of an inherited IRA when Jim dies?
Jim dies and names Mike as his beneficiary on the beneficiary form. Five years later Mike dies and has named Phyllis, who is a successor beneficiary, on the beneficiary form. The IRS has some complicated rules for titling inherited IRAs when there are successor beneficiaries.
When do beneficiaries of an inherited IRA get a distribution?
You transfer the assets into an Inherited IRA held in your name. Distributions must begin no later than 12/31 of the year the account holder would have reached 70½. Your annual distributions are spread over your single life expectancy, which is determined by your age in the calendar year following the year of death and reevaluated each year.
What happens to an IRA when the owner dies?
When an IRA owner dies while the IRA still has funds in it, the primary beneficiary(ies) have the opportunity to transfer the account to an inherited IRA and begin taking the Required Minimum Distributions (RMDs) over his or her lifetime. When this primary beneficiary dies, it can be difficult to figure out who the money goes to.
When to withdraw money from an inherited IRA?
If the original IRA owner died on or after January 1, 2020, the SECURE Act, which eliminated the Stretch IRA, requires non-spousal beneficiaries to withdraw all assets from an inherited IRA or 401 (k) plan by December 31 of the 10th year following the IRA owner’s death.
