Inheriting an IRA requires careful scrutiny from fiscal experts

May 13, 2011

Is it important to know all the facts when inheriting an IRA

Receiving an IRA from a spouse or loved one may seem like a blessing, but there are financial pitfalls that are not easily seen or avoided, according to the Times Free Press.

If the inheritor is the spouse, the IRA can be rolled into his or her current retirement account and they have nothing to change or worry about, according to the Boston Globe.

That is where the easy part stops. For anyone else who is inheriting an IRA, there are careful steps to be followed to avoid paying an exorbitant amount of taxes, or get lied to by the custodian, if it is an employer-sponsored account, according to the Times Free Press.

Employer accounts may have specifics tied to them that can specify the distribution method. If the custodial options are limited or outdated, experts recommend moving the account to another custodian.

The IRA can be put into a beneficiary account and taken out over time, or taken in one lump sum, which many experts do not recommend. By taking the funds out all at once, the recipient will most likely receive a huge income tax bill and will not benefit from the years of untaxed savings that are associated with an IRA. 

< Back

Follow Efinancial

Free Life Insurance Quotes

Zip Code

Height/Weight (lbs.)