What Are Inherited IRA Withdrawal Rules?


Quick Answer

When an individual inherits an IRA, he can either treat it as his own IRA or begin taking distributions from the account, states the Internal Revenue Service. If the individual takes distributions from a traditional IRA, he may claim deductions from the estate tax.

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Full Answer

If the individual inherits an IRA from a spouse, he may treat the IRA as his own by transferring the existing account into his name or rolling over the money into a new IRA or other retirement account, advises the IRS. In this case, he may continue to make contributions to the account, but he may have to pay a 10 percent penalty tax for making withdrawals before the age of 59.5.

The spouse may alternatively choose to treat himself as the beneficiary of the IRA. In this case, the individual may not make any contributions to the account and must begin taking at least the minimum distributions, advises the IRS. As of 2015, these distributions are subject to income tax, but no penalty tax, even if the spouse is under the age of 59.5. The IRS calculates the minimum distribution based on the individual's age, life expectancy and the funds in the IRA. Individuals inheriting an IRA from someone who is not his spouse must follow these rules.

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