What are some key IRA inheritance rules?


Quick Answer

If the beneficiary is someone other than a spouse, he must begin taking distributions by Dec. 31 of the year he inherits the IRA, explains Deborah L. Jacobs for Forbes. If a spouse inherits the IRA, he can roll it into his own IRA.

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Full Answer

If the deceased IRA owner was 70.5 years old or older, beneficiaries need to make certain the mandatory distribution for the year of the owner's death is withdrawn. If the estate paid estate tax, beneficiaries may have the option of taking an itemized deduction to offset IRA income, according to Jacobs. Also, the minimum amount is calculated differently than for a person's own IRA, by taking the balance on Dec. 31 of the previous year and dividing it by the beneficiary's life expectancy listed in the single life expectancy table provided by the IRA, rather than calculating it by the table used for IRA owners.

Beneficiaries can also make sure assets directly transfer from one account to another or from one IRA custodian to another. When a nonspouse inherits an IRA, there is no option for a 60-day rollover. If the beneficiary takes a check, the money is taxed as ordinary income and is not eligible to be deposited into another IRA or back into the inherited IRA, states Fidelity.

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