Inheriting an IRA? Here’s What You Need to Know Inheriting an Individual Retirement Account (IRA) can be both a financial opportunity and a challenge. On one hand, receiving a sizable inheritance can boost your financial stability, help you achieve long-term goals, and even provide a reliable income stream. On the other hand, inheriting an IRA…
If you get an inheritance from your spouse, parents, or other generous benefactor, chances are that some, or even all, of that inheritance will be in the form of an IRA. Many people are opting for IRAs, especially retirees who often roll over their 401(k) upon retiring. The rules for accepting an inherited IRA are different than for inherited cash. Your options depend on what type of IRA (Roth or Traditional), who’s giving it to you (spouse or non-spouse), and how old the benefactor was. It’s easy for a simple misstep to lead to a large tax bill, so tread carefully when inheriting an IRA.
The most important thing to keep in mind when dealing with an inheritance is to create a plan for its use. Because of the emotional circumstances surrounding your inheritance, it may be best to wait before making any decisions so you have time to process your thoughts and develop a coherent plan.