Inherited IRA

AAA

DEFINITION of 'Inherited IRA'

An individual retirement account that is left to a beneficiary after the owner's death. If the owner had already begun receiving required minimum distributions (RMDs) at the time of his or her death, the beneficiary must continue to receive the distributions as already calculated or submit a new schedule based on his or her life expectancy.


INVESTOPEDIA EXPLAINS 'Inherited IRA'

If the owner had not yet chosen an RMD schedule or reached 70.5 years in age, the beneficiary of the IRA has a five-year window to withdraw the funds, which will be subject to income taxes.

A spouse who receives an inherited IRA can choose to roll it over into his or her existing IRA accounts with no penalties. This option does not exist for non-spouse beneficiaries.

Tax laws surrounding inherited IRAs are quite complicated. Beneficiaries should seek the advice of a tax professional if they inherit an IRA.

Because IRAs are relatively new, look for more changes in tax laws over time as the number of inherited IRAs grows.

RELATED TERMS
  1. Designated Beneficiary

    The person who determines how long the retirement plan will survive ...
  2. Estate Tax

    A tax levied on an heir's inherited portion of an estate if the ...
  3. Extended IRA

    An IRA that allows a second generation beneficiary to continue ...
  4. Traditional IRA

    An individual retirement account (IRA) that allows individuals ...
  5. Roth IRA

    An individual retirement plan that bears many similarities to ...
  6. Contingent Beneficiary

    1. A beneficiary specified by an insurance contract holder who ...
Related Articles
  1. Distribution Rules For Inherited Retirement ...
    Taxes

    Distribution Rules For Inherited Retirement ...

  2. IRA Assets And Alternative Investments
    Retirement

    IRA Assets And Alternative Investments

  3. 3 Deadlines For Retirement Plan Beneficiaries
    Retirement

    3 Deadlines For Retirement Plan Beneficiaries

  4. How IRA Contributions Affect Your Taxes
    Retirement

    How IRA Contributions Affect Your Taxes

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center