Father’s Death
My father passed on some stocks that are held in a Schwab account for me. Since these accounts can go up and down with the market (I presume), can I roll this into an Inherited IRA and still be able to take funds out of it as needed, without the early penalty withdraw, but the 10% tax withheld?
Permalink Submitted by Alan Spross on Mon, 2012-03-12 22:33
If the stocks are held in a retirement account (eg 401k, IRA), you can have an inherited IRA, from which you must take mandatory distributions that are taxable, but no 10% penalty.
But if they are in a taxable account, such as a Schwab One account, they cannot be placed in an inherited IRA. The tax cost basis of these stocks were adjusted to the date of death value, meaning you could sell them with no capital gains except on the gains that occurred after his death. You could use that money to help you afford to make regular IRA or employer plan contributions if you have earned income from a job, self employment of alimony.
If these shares were not in a retirement account, you should talk to Schwab about transferring them over to your own Schwab account. In some cases inheriting a taxable account is better than inheriting a pre tax IRA since amounts up to the date of death value can be distributed tax free, and there are no mandatory distributions from such an account like there is for an inherited retirement plan.