Did you inherit an IRA?
Tax Tip of the Week
May 18, 2015
Did you inherit an IRA?
Inheriting an individual retirement account from someone other than your spouse can be a complicated process, and you might be tempted to procrastinate before tackling the tax rules. But knowing what you're required to do can keep you from losing part of your inheritance to penalties.
Here are three actions to get started.
- Find out if the IRA owner was required to take distributions. The answer will affect how much you'll need to withdraw from the account and the time period you have to make the withdrawals. In addition to any withdrawals you're required to take as a beneficiary, you also need to be sure to satisfy the account holder's required minimum distribution for the year.
- If multiple beneficiaries are named, determine their ages. The general rule is that all beneficiary distributions are based on the age of the oldest named beneficiary. However, you may be able to establish separate "inherited IRA" accounts for each beneficiary. That allows distributions to be calculated based on the age of individual beneficiaries, which could mean spreading the withdrawals over a longer time.
- Consider your tax situation. Would you prefer to have the inheritance go to another family member? You can "disclaim" or turn down your share by providing the IRA trustee with a written form stating your intention. Caution: Disclaimers are irrevocable, so be sure you're certain of who is next in line to inherit.
The tax rules governing inherited IRAs have specific deadlines. Please give us a call so we can help you manage these key dates.
"Business Tips" are published monthly to provide useful business information. Return to this site every month for helpful suggestions on how to make your business more profitable. If you would like more information on anything in "Business Tips," or if you'd like to be on our mailing list to receive other business, tax, or financial information from time to time, please contact our office.
The business information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
© MC 2015
May 18, 2015
Did you inherit an IRA?
Inheriting an individual retirement account from someone other than your spouse can be a complicated process, and you might be tempted to procrastinate before tackling the tax rules. But knowing what you're required to do can keep you from losing part of your inheritance to penalties.
Here are three actions to get started.
- Find out if the IRA owner was required to take distributions. The answer will affect how much you'll need to withdraw from the account and the time period you have to make the withdrawals. In addition to any withdrawals you're required to take as a beneficiary, you also need to be sure to satisfy the account holder's required minimum distribution for the year.
- If multiple beneficiaries are named, determine their ages. The general rule is that all beneficiary distributions are based on the age of the oldest named beneficiary. However, you may be able to establish separate "inherited IRA" accounts for each beneficiary. That allows distributions to be calculated based on the age of individual beneficiaries, which could mean spreading the withdrawals over a longer time.
- Consider your tax situation. Would you prefer to have the inheritance go to another family member? You can "disclaim" or turn down your share by providing the IRA trustee with a written form stating your intention. Caution: Disclaimers are irrevocable, so be sure you're certain of who is next in line to inherit.
The tax rules governing inherited IRAs have specific deadlines. Please give us a call so we can help you manage these key dates.
"Business Tips" are published monthly to provide useful business information. Return to this site every month for helpful suggestions on how to make your business more profitable. If you would like more information on anything in "Business Tips," or if you'd like to be on our mailing list to receive other business, tax, or financial information from time to time, please contact our office.
The business information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
