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

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center