What rules should I be aware of when inheriting a previously inherited Traditional IRA?

My mother inherited her sister's Traditional IRA. The account was making distributions and my mother was old enough to continue receiving them. I am now the beneficiary of my mother's account, but I have not reached the minimum age for distributions. Are there different treatment, taxes, or rules of a a non-spousal Traditional IRA if someone inherits from a parent who had inherited the account themselves? Or are the rules the same as they were for the first transfer?

Estate Planning, IRAs, Retirement Plans
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1 week ago
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As the beneficiary of the account you are free to take withdrawals in any amount right away, and could distribute the entire amount if you wanted to. The IRS would be glad to tax all the remaining tax-deferred growth, and since the account has already done it's job of seeing your aunt through her lifetime, the age constraints for withdrawal are no longer an issue. What's more important is that you're aware that there could be an opportunity for you to leave funds in the account to continue to grow tax free.

If your aunt set her account up as a Stretch IRA, naming your mother as primary beneficiary and you as the contingent beneficiary, or if you were designated as your mom's successor beneficiary, it's possible you could limit your withdrawals to the Required Minimum Distributions (RMD) based on your mother's life expectancy. If she predeceased the IRS's RMD schedule set for her, you could still have time to defer the account's gains and withdraw funds gradually — allowing you to pay the tax gradually as well.

Because a Traditional IRA is a pre-tax account, the IRS is eager to finally have tax paid on the original deposits and gains. As the second beneficiary of the account, the clock is ticking faster on those funds to be distributed and ultimately taxed. Once you do make withdrawals they will be subject to regular income tax. If any non-deductibe contributions were made to the account by your aunt, then each distribution would be partially taxed and partially tax-free, mirroring the overall corresponding proportionality of the account.

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