IRAs have now been around for decades. This means these accounts are now being inherited by beneficiaries and even, increasingly, by successor beneficiaries. Here are 3 things you must know if you are a successor beneficiary who inherits an inherited IRA:
1. You can continue the stretch. One of the first questions you may have when you inherit an inherited IRA may be about when distributions are required. You may wonder if you can continue the stretch or maybe even extend the stretch over your own life expectancy. The bad news is that as a successor beneficiary you cannot use your own life expectancy to calculate required minimum distributions (RMDs). The good news, however, is that you can step into the shoes of the original beneficiary and continue on with the stretch that would have been available to him had he lived. This may allow for more years of tax-advantaged growth!
2. You can’t do a spousal rollover. This is a tricky one. Even if you inherit an inherited IRA from a spouse, you cannot do a spousal rollover. Let’s say that your spouse inherits an IRA from his Uncle Jim. Your spouse names you as the successor beneficiary on this inherited IRA. If your spouse should pass away you can continue the stretch on the inherited IRA but you cannot do a spousal rollover. Why? That is because the original account owner was Uncle Jim and he was not your spouse.
3. You should name a successor beneficiary. When you inherit an inherited IRA as a successor beneficiary, there is one thing you should do right away: that is name your own successor beneficiary. That way, in the event of your death, the stretch could continue. Your successor beneficiary could continue to take RMDs using the original beneficiary’s calculation. By naming a successor beneficiary you enable the maximum stretch to continue into the next generation.
I am an Ed Slott Master Elite trained IRA Specialist and I would like to help you. If you have any questions regarding this article or would like to schedule a complimentary consultation please call my office at 845-627-8300. My Client Service Coordinator Christina will be happy to set up a convenient time so I can help.Warm Regards,
Beth Blecker CEO
Eastern Planning Inc.
Follow Beth Blecker on Twitter: @EasternPlanning
“Ed Slott’s Elite IRA Advisor Group” is solely an indication that the financial advisor has attended training provided by Ed Slott and Company. Ed Slott is not affiliated with Royal Alliance Associates, Inc. Securities and advisory services offered through Royal Alliance Associates, Inc. Member FINRA/SIPC. Additional advisory and financial planning offered through Affiliated Advisors, Inc. Insurance services offered through Eastern Planning Inc. Listed entities not affiliated with Royal Alliance. Reprinted from The Slott Report, 8/21/2019, with permission. Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article. Copyright © 2019 Ed Slott and Company, LLC