Inherited IRA


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.


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.

  1. Contingent Beneficiary

    1. A beneficiary specified by an insurance contract holder who ...
  2. Designated Beneficiary

    The person who determines how long the retirement plan will survive ...
  3. Roth IRA

    An individual retirement plan that bears many similarities to ...
  4. Estate Tax

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

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

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