Warning: Creating default object from empty value in /home4/mldbm01/public_html/wp-content/themes/optimize/optimize/functions/admin-hooks.php on line 160

The beneficiary of the IRA inherits the IRA when the IRA owner dies. Beneficiaries of a traditional IRA must include in their taxable income any distributions they receive from the IRA.

If you inherit a traditional IRA from your spouse, you have the choice of:

  • Treating it as your own IRA by designating yourself as account owner.
  • Treating it as your own and roll it over into your own IRA or depending on the extend it is taxable roll it into a 401k, 403a, 403b or 457 plan.
  • Treating yourself as beneficiary and not treating it as your own.

You will considered as treating it as your own if contributions are made to the inherited IRA, you do not take the RMD (required minimum distribution) for a year as beneficiary, you are the sole beneficiary and have unlimited rights to withdraw from it. You can roll a distribution for your deceased spouse’s IRA into your own IRA within 60 days as long as it is not a required distribution (even if you are not the sole beneficiary).

You cannot treat the IRA as your own if you inherit an IRA from anyone other than your deceased spouse. This means you can’t make contributions or roll money into or out of the inherited IRA. You will not owe taxes until you receive distributions from the IRA and you must follow the rules for distributions that apply to beneficiaries.

The rules for determining RMD for beneficiaries depends on whether the beneficiary is an individual or not. We will talk here about surviving spouse only (beneficiary is an individual). If you are the surviving spouse who is sole beneficiary of the deceased spouse IRA, you may elect to be treated as the owner and therefore you decide on the required minimum distribution as if you were the owner (except for the year your spouse died you take the deceased owner’s RMD for that year). Also note that if you are an individual you can elect to take the entire account by the end of the fifth year following the year of the owner’s death. Remember that the rules for determining the RMD if the beneficiary is not an individual is different than if the beneficiary is an individual and is not discussed here.

Figuring the beneficiaries RMD is somewhat complicated so make sure you seek a competent CPA and/or tax attorney to help and advise.