What Are the Rules for Rolling Over an Inherited IRA?


Quick Answer

Among the rules governing inherited individual retirement accounts, or IRAs, are that a nonspouse beneficiary of an IRA cannot roll it over to his own IRA. He can instead transfer the account to a special type of IRA called an inherited IRA or take payments as deductible income, notes CBS News.

Continue Reading
Related Videos

Full Answer

An IRA is a type of an individual retirement plan that is offered by many financial institutions in the United States. Having an IRA has several advantages for retirees including tax advantages for retirement savings. An IRA may be inherited if the plan holder dies.

A spouse who inherits an IRA may choose to continue to contribute to it and refuse distributions to avoid a 10 percent additional tax that is usually levied on early distribution. Spouses can likewise choose to rollover the IRA into another plan and receive distributions as a beneficiary or disclaim it to enable their children to inherit it. The IRA funds may also be withdrawn by the spouse in one lump sum, which can subject the spouse to federal taxes in some cases.

Nonspouse beneficiaries of an IRA account have the option of opening an inherited IRA account called a beneficiary distribution account. When opening this type of account, it is important that the IRA account custodian registers the account properly, notes CBS News. Nonspouse beneficiaries can also request a trustee to trustee transfer of IRA funds or disclaim the inherited IRA.

Learn more about Financial Planning

Related Questions