What is the proper way to set up an inherited IRA? I was told that I have to make annual withdrawals. Is that correct? (Financial Planning)

0 Votes

Advisor: Thomas J. Hartfield, Financial Advisor
Oct 26, 2009

You have a few different choices if you are the beneficiary of an IRA account and your IRA distribution options available generally depend on whether the IRA owner died before or after April 1st of the year following the year in which he or she turned age 70 1/2. There is using Separate Shares for Multiple Beneficiaries and there is also the five-year rule. You definitely want to give this some serious thought as distribution elections are irrevocable. You will also hear the term Stretch IRA. At this point I have more questions than I can provide info answers to as there are a few different options you have depending on the specific situation. Feel free to contact should you require assistance. Disclaimer: I am a Financial Advisor and can not provide tax advice and strongly suggest you consult with a Tax Advisor.

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Advisor: Zubin JB, Financial Advisor
Oct 26, 2009

It depends if the IRA is from a spouse or non-spouse - different rules apply. And one needs to be really careful in making the correct decision as you could be liable for a big tax bill if it is not done properly. The article mentioned in the previous answer is a good starting step. HOWEVER, it is a very complex issue, and should be handled with care, especially if the IRA is a meaningful amount.

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Advisor: Kerry Freeman EA, IRS Tax Relief
Oct 26, 2009

Here are the most common options.

1. Total distribution

2. Based on the longer of yours or deceased/owners life expectancy.

The spouse might have other options to explore.