By Joe Cicchinelli, IRA Technical Expert Follow Me on Twitter:@JoeCiccEdSlott
Are you inheriting an IRA? Here is a quick checklist for you. This list is designed for individuals who inherit as named beneficiaries. Some items will be different for a spouse beneficiary or if an estate or a trust inherits an IRA.
DON’T Distributions payable to you are fully taxable. They cannot be put into another IRA.
DO The inherited account should be retitled. It should retain the name of the account owner. Example: John Smith, deceased, IRA fbo (for benefit of) Mary Jones
DO Funds can be moved to another inherited IRA account but only as a direct transfer – i.e. the funds go directly from one IRA custodian to another or a check payable to the new IRA custodian is issued.
DON’T Some IRA custodians may not offer a direct transfer option. Again, any checks payable to you will be taxable and cannot be put into another inherited IRA.
DO You have required distributions beginning in the year after the account owner’s death – regardless of your age. Those distributions will be taxable to you but they are not subject to the early distribution penalty.
DON’T You cannot contribute your annual IRA contributions to the account.
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