Freeman's Blog


October 5, 2015
October 5th, 2015 by




Although IRAs are primarily intended to help fund retirement, some people don’t withdraw all IRA monies during their lifetimes. Any remaining money goes to the account owner’s designated beneficiaries and could provide a generous legacy.

If you’ve inherited an IRA or might inherit one in the future, it’s important to understand your options.

IRS rules and regulations for inheriting an IRA can be complicated, and an uninformed decision could result in unexpected taxes and penalties.

To Stretch or Not to Stretch?

An individual who inherits an IRA can take all or part of the funds as a lump-sum distribution or stretch withdrawals over his or her life expectancy (under current law) by taking required minimum distributions (RMDs). If the original account owner was under 70½ at the time of death, the beneficiary could delay distributions until December 31 of the fifth year after the original owner’s death, but all the monies must be distributed by that time.

The lump-sum approach may be appropriate for small accounts, but you should think twice before liquidating a large account. Distributions from a traditional IRA are subject to ordinary income tax, so taking a large distribution could push you into a higher tax bracket and reduce the potential value of the inheritance. Roth IRA distributions might not be taxable (as long as the original owner met the Roth five-year holding requirement), but liquidating the account would lose the benefit of potential tax-free growth.Inheriting An IRA

Taking RMDs (Required Minimum Distribution)

The rules on RMDs depend on the beneficiary’s relationship to the original owner. RMDs are generally based on the life expectancy of the beneficiary.

A non-spouse beneficiary who doesn’t cash out should properly re-title the account as an inherited IRA — such as “Joe Smith (deceased) for the benefit of Mary Smith (beneficiary).” Inherited IRAs are not subject to early-withdrawal penalties, but they are subject to annual RMDs, which must begin no later than December 31 of the year after the original owner’s death (regardless of the beneficiary’s age). However, if the original owner died after age 70½ and failed to take an RMD in the year of death, the beneficiary must take at least the amount of the RMD by December 31 of that year.

A surviving spouse who is the sole beneficiary has more options. The survivor can treat the money as his or her own by rolling them over to an existing or a new IRA. RMDs would not have to start until age 70½ (distributions before age 59½ may be subject to a 10% early-withdrawal penalty). If the account remains an inherited IRA with the surviving spouse as sole beneficiary, minimum distributions are based on the beneficiary’s or the late spouse’s life expectancy (whichever is longer). If the late spouse died before reaching age 70½, distributions can be delayed until the year he or she would have turned 70½, but RMDs would be based on the surviving spouse’s life expectancy.

Another option that may be available to both spousal and non-spouse beneficiaries is to disclaim the IRA and allow it to pass directly to the account’s contingent beneficiaries. RMDs typically would be lower if based on the life expectancy of a younger beneficiary, which may result in a more significant opportunity for the financial instrument to pursue growth.

RMD rules become more complex when multiple beneficiaries are designated or when the IRA is left to the estate or trust. Be sure to consult with a tax or estate professional before taking any specific action.

Freeman Owen, Jr - Host of "Safe Money Talk" on CBS Radio The Big Talker 1580AM Plan for your retirement and the legacy you will leave behind. Early preparation can get you to your goals!
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April 12th, 2013 by

Trillions of dollars are expected to pass to heirs in the coming years.

Here are some tips you may want to consider if you happen to benefit from an inheritance:

  • Wait to act. You might regret quitting your job, buying a sports car, or making other snap decisions before you have really thought them through. It’s important to consider carefully how the money could be used to strengthen your financial position over the long run.
  • Pad your emergency dollars first. Add to your nest egg if you don’t already have enough to cover at least six months to a year’s worth of everyday living expenses.
  • Boost (don’t blow up) your lifestyle. Put the money into a safe place and consider allowing a financial vehicle to supplement your employment earnings. This will allow you to live better now while still preserving the bulk of the money for future needs such as a child’s college education or your retirement.
  • Practice discretion. Telling others that you have inherited a substantial amount of money may lead to unwanted advice, business or opportunity solicitations, and outright requests for financial support from friends and relatives.
  • Consider meeting with an expert in retirement strategies. Discussing your situation with someone outside of your family may help you gain perspective, clarify your goals, and make sound decisions. To keep your money safe, consider meeting with an expert who can help plan your future goals in retirement.

life_guide_inheritanceI have a free resource to help you if you have inherited a sum of money. Keeping your inherited money safe over a long period is essential to being able to enjoy it as well as pass it onto your future heirs.

Keep Your Money Safe

My motto remains the same for an inheritance and retirement planning: Keep Your Money Safe. My consultation is always free. Call 1-833-313-7233

Source:, February 15, 2011