Non-Spouse Beneficiary IRAs

by | Jul 21, 2014 | Videos, Asset Management

What are your options when you inherit an IRA from somebody who wasn’t your spouse? This is a great question and one that we help clients with on a regular basis. There are a handful of options available in this situation. This specific type of IRA is fittingly referred to as a non-spouse beneficiary IRA.

In the event that you inherit a non-spouse beneficiary IRA, the straightforward plan of action is to take a distribution for the entirety of that account. This means paying taxes on the money and also a penalty if you’re under age 59 1/2. Many investors make the mistake of assuming this is their only choice though.

While you won’t be able to roll the inherited IRA into your own, you can actually keep the IRA. Bear in mind that if the original owner began their required minimum distributions, they must be continued. You may continue the payments over the original owner’s life expectancy or your own. If required distributions weren’t being taken before inheritance, they’ll need to be started. They’ll be based off your life expectancy and age.

Another option is to spread the distributions over a five year period. This will not incur a penalty.

Make sure to watch the video to hear from Tom on this topic! As always, consult with your investment advisor before making any decisions regarding a non-spouse beneficiary IRA or any other type of investment or account.

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