Inherited IRA’s
I understand how Inherited IRA’s work for adult children, my concern is how may an Inherited IRA be set up for minor children. I spoke with a local credit union, and they informed me that minor children do not have to perform the RMD’s, however once they reach the legal adult age, they must take the entire amount out of the IRA paying all the taxes at that time. So my question is may an Inherited IRA be set up for minor children so that they may keep it and stretch it out during their lifetime?
I appreciate very much your help in this area.
Thanks,
Ken Hewitt
915-779-8163
Permalink Submitted by Alan - IRA critic on Thu, 2016-02-25 17:52
The CU appears to have RMD rules and UTMA/UGMA rules confused. An UTMA account for the minor can be listed as the IRA beneficiary or in some states that might be a requirement. The beneficiary RMDs must be taken every year and paid into the UTMA account. It is the UTMA account that is closed at the age of majority, not the IRA. The inherited IRA would continue to be stretched over the life expectancy of the minor and paid to that beneficiary directly after they reach majority and the UTMA account is terminated.
Permalink Submitted by S M on Sun, 2016-02-28 04:14
I have to take an RMD from my inherited IRA. Are there any restrictions that keep me from using this money to contribute to my own Roth IRA or 401K?
Permalink Submitted by Alan - IRA critic on Sun, 2016-02-28 16:15
You can make the other contributions if you are eligible, but those are new contributions, not a rollover from the inherited IRA RMD. The RMD must be reported as taxable income.
Permalink Submitted by S M on Tue, 2016-03-01 04:16
As always, very helpful!