Yahoo Answers is shutting down on May 4th, 2021 (Eastern Time) and beginning April 20th, 2021 (Eastern Time) the Yahoo Answers website will be in read-only mode. There will be no changes to other Yahoo properties or services, or your Yahoo account. You can find more information about the Yahoo Answers shutdown and how to download your data on this help page.
Trending News
When you inherit an IRA how does it usually arrive..in tact or liquidated?
I am an only child, no one is contesting the will, and my dad passed last week. Everything seems to be going fine with executing the will....except the IRA. The lawyer is having a glitch in the fact that a retirement fund of a 72 year old is being handed down to a 35 year old....to put it in his words..."The Government is going to want those taxes now".
So, what typically happens? Does the IRA have to be totally cashed out to be inherited? And if so do they use his retired tax bracket or mine?
Any information would be greatly appreciated...I am planning on hiring a professional finance person to sort through this mess, but first I would need to get the mess and I just want to be as informed as I can be.
2 Answers
- RetirementGuruLv 59 years agoFavorite Answer
Sorry for your loss.
If you're the designated beneficiary, (1) you would set up a new beneficiary/inherited IRA with your dad as the decedent and you as the beneficiary, and name new beneficiaries of your own. The assets, then, would be transferred to this new account, so for now, it's probably easiest to keep it at the same financial institution.
(2) Once the funds are in your account, and under your complete control, you can do what you wish with it, including, liquidating it and taking a full distribution, investing the assets in a way that's consistent with your objectives and risk tolerance, take a little, invest the rest, and/or transfer it to a new financial institution, etc. It's your account now.
(3) What you MUST do, however, as a non-spouse beneficiary, is begin taking RMDs (required minimum distributions) starting no later than the year after your dad's death. RMDs will be calculated based on your life expectancy, reduced by "1" each year. You can speak to your IRA custodian for more details.
Taxes. Withdrawals will be taxed as ordinary income to the extent said withdrawals would have been taxable to your dad. The 10% early withdrawal penalty is waived. Failure to satisfy your RMDs, however, can result in an 50% IRS penalty calculated on the shortfall.
Hope my answer was clear and earns your Best Answer vote!
DISCLAIMER FOR PROFESSIONALS: While the information in this response was obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. The opinion voiced in this answer is for general information only and it shall not be construed as tax, legal, or investment advice for any individual. Questioners are urged to consult with their professional advisers before making any decisions regarding their finances.
Retirement Guru, CFP®, EA, CES, CFS, AAMS
Certified Financial Planner™ Practitioner
Enrolled Agent | Admitted to Practice before the IRS
Certified Estate and Trust Specialist
'Providing sound Retirement and Estate Planning Strategies since 1985'
- Wayne ZLv 79 years ago
Sorry for your loss.
The IRA should be transferred to you intact.
You can cash it out all at once or a little over time. The money will be taxed as ordinary income to you but only as you cash it out. The money will be taxed at your rate. There will not be a 10% penalty regardless of your age.
