A person inheriting an IRA has several options on how to take the money. Any beneficiary has the option of a lump-sum distribution or taking distributions over a five-year period. A surviving spouse may continue the IRA as if it were her own, making contributions and taking distributions based on her age and life expectancy. A non-spousal beneficiary has a similar, but distinctly different option of rolling the money over into a beneficiary IRA and starting regular distributions based on his life expectancy. Only a spouse has the right to convert an inherited IRA into a Roth.
Things You'll Need
- IRA statement
- Death certificate
Call the IRA custodian and request a death benefits form to continue the IRA as your own. You may be required to open a personal IRA if you don't already have one with you as the owner.
Complete the required paperwork, rolling the money into your personal IRA. Be sure to chose the transfer section on the death benefits form to prevent distributions starting.
Submit the signed paperwork to the IRA custodian along with a death certificate. You will need a certified death certificate, not a copy, to obtain death benefits.
Call the IRA custodian when the rollover is complete and the IRA is funded with your deceased spouse's IRA assets. Request conversion paperwork.
Complete the conversion paperwork, signing the forms and submitting it back to the custodian for processing.
Add the converted amount to your gross income for the year the conversion is made. The 2010 IRS regulations allow you to split the converted amount when filing taxes in 2011 and 2012. Income is recorded on Line 15, Form 1040 as indicated on the Form 1099-R sent by the IRA custodian.