IRA Rules for Beneficiaries
As the beneficiary of an IRA, you want to accept your inheritance in the most tax-efficient manner. The rules for the spouse of the deceased and those for non-spouses differ. Know what your options are before you take the proceeds from an inherited individual retirement account.
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Types
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If you are a spouse beneficiary, you may convert the inherited account to your personal IRA, and it becomes your own. If you prefer, you can move the money into a beneficiary IRA.
Function
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A non-spouse beneficiary can take all of the proceeds from an inherited IRA at one time (and pay income tax on the funds) or convert the inheritance to a beneficiary IRA to postpone owing taxes.
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Time Frame
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When the deceased died under the age of 70 1/2, a spouse can take the proceeds of her traditional IRA inheritance over 5 years or over the span of her remaining lifetime.
Consideration
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If a traditional IRA account holder was over 70 1/2, a spouse is required to begin withdrawals based on minimum distribution rules for her age.
Identification
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If a spouse beneficiary inherits a Roth IRA, she must be the sole beneficiary if she chooses to call the account her own.
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