We’ve covered the differences between Roth and Traditional IRAs, but what happens after the owner of an IRA account passes? The answer is different depending on the beneficiaries.
Spouses
Spouses of a deceased IRA owner have a few options for inheriting the funds in the account:
- Name yourself as the owner of the IRA and begin treating it as your own
- Roll the IRA into your own existing account
- Act as the beneficiary of an inherited IRA
Though the first two options are only available to spouses, they are the only way in which an investor can continue contributing to an IRA account once the original owner has passed.
Eligible Designated Beneficiaries
The qualifications for being an EDB are as follows: chronically ill, disabled, minor child, no more than 10 years younger than the IRA’s original owner
If the beneficiary of an IRA falls into one of these categories, their options are as follows:
- Receive the inherited IRA and take distributions based on your current life expectancy. Regular RMD rules will apply.
- Receive the inherited IRA and liquidate the account for no more than 10 years, 5 years for ROTHs.
Designated Beneficiaries
All other inheritors are designated beneficiaries. These individuals have one option, and that is to receive the inherited IRA in their name and liquidate the account via distributions over the course of the next 10 years.
Deciding which means for transferring ownership of an inherited IRA can be a difficult decision, especially when compounded with the loss of a loved one. For assistance in making these decisions or to schedule a complimentary financial review with Moore’s Wealth Management, click here or call our office at 770-535-5000, where a staff member is awaiting your call Monday through Friday, 9 AM to 5 PM.
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