7 Inherited IRA Rules That Might Surprise You (as a non-spouse)

(don’t forget to checkout the video too)

So, you just inherited an IRA⁉️

You might think you can just roll that into your own IRA and you’ll be fine…

But there are a lot of special rules that apply to an inherited IRA that not many people are aware of!

Here are 7 rules that you might not have known about inherited IRAs:

✅ You cannot contribute to your inherited IRA 🫤

This isn’t like your own IRA where you’re allowed to contribute funds for retirement. An inherited IRA is a vehicle that must be liquidated in a systematic fashion.

✅ You are allowed to move your inherited IRA 😏

Just like your normal Traditional IRA, if you aren’t happy with your investment advisor, you can move your inherited IRA elsewhere.

✅ You may be able to do a Qualified Charitable Distribution (QCD)

If you are over 70–1/2 you can roll $100,000 (annually) from your inherited IRA to a charity of your choice with a tax-free transfer.

✅ You cannot convert to a Roth IRA 😯

People always ask if they can do a Roth conversion on an inherited IRA and unfortunately, the answer is no.

✅ You may be subject to RMDs AND the 10-year rule 🤔

Most non-spouse beneficiaries are required to take all of the money out of an inherited IRA in 10 years, but some are ALSO required to take RMD’s out too‼️

(note: in some cases, the RMDs can be stretched over life expectancy, but not usually)

✅ Distributions are taxable (but luckily no 10% penalty)

Unless you inherited a Roth IRA your distributions are almost certainly going to be taxable to you. 🤦‍♂️

✅ Be sure to name a successor beneficiary

If you don’t designate a beneficiary and something happens to you, that money could end up in probate, triggering time, money, and possibly additional taxes.🫣

Inheriting an IRA can certainly be a way to supercharge your own retirement but you want to be smart about how you manage the money. This is especially true if you are leveraging an inherited IRA as part of your retirement income strategy.

You want to take distributions as strategically as you can to minimize taxes now and hopefully help fund your own tax-free retirement down the road.

Let’s chat 💬😎