Inherited IRAs

Understand your beneficiary distribution options.

As an IRA beneficiary, you have some choices.

If you've inherited an IRA, make sure you understand your options.

Because of the IRS rules, your options as an IRA beneficiary depend on certain factors.

First, answer this question... When did the IRA owner die?

Before January 1, 2020:

Continue the same method of payment that you previously elected. If you have not yet made an election, consult with the financial organization holding your IRA or review the IRA document for your options.

On or after January 1, 2020:

See the distribution options described below. Because there may be exceptions to these options, consult further with a competent advisor or with the financial organization holding the IRA.

Before you decide what to do with your inherited IRA, you may have some questions.

What are my choices?

As an IRA beneficiary, your distribution options will depend on these factors.

What the IRA plan agreement allows
When the IRA owner died
Your age and relationship to the IRA owner

The options described here are allowed by federal laws and IRS regulations, but the plan agreement for the IRA you've inherited may be more restrictive. Check with your financial organization about your specific distribution options.

Am I affected by the new rules?

The Setting Every Community Up for Retirement Enhancement (SECURE) Act changed the distribution options for beneficiaries when IRA owners die on or after January 1, 2020. The key change is that most nonspouse beneficiaries who are more than 10 years younger than the IRA owner must distribute the inherited IRA assets within 10 years; they can no longer stretch IRA payments over their own life expectancy. This applies to Traditional, Roth, and SIMPLE IRAs, and to employer-sponsored retirement plans.

For IRA owners who died before January 1, 2020, the beneficiary distribution options in effect before the SECURE Act continue to apply.*

Traditional, Roth and SIMPLE IRA Beneficiary Options When IRA Owner Dies On or After January 1, 2020*

Spouse	Transfer Rollover Lump sum 10-year rule Life expectancy payments
*Nonspouse not more than* 10 years younger than the IRA owner, IRA owner's minor child, disabled, or chronically ill persons, beneficiaries of IRA owners who died before January 1, 2020**	Lump sum 10-year rule Life expectancy payments
*Nonspouse more than* 10 years younger than the IRA owner**	Lump sum 10-year rule

Nonpersons (such as an estate or charity) that inherit IRAs generally must follow the distribution rules in effect before 2020, even for deaths occurring on or after January 1, 2020. For Roth IRAs, the five-year rule generally applies (distribute entire balance within five years.) For Traditional and SIMPLE IRAs, the five-year rule applies if the IRA owner died before his required beginning date (RBD) for required minimum distributions. Single life expectancy payments (based on the IRA owner's age) apply if he died on or after the RBD.

Minor children of the decedent must start single life expectancy payments in the year after the IRA owner's death, and must distribute the entire balance within 10 years after turning age 21.

Is there a deadline for choosing a distribution option?

If you have distribution options as a beneficiary, you generally have until December 31 of the year following the year of the IRA owner's death to decide which option you prefer. But at any time, you can speed up your withdrawals or distribute the entire amount.

Will I have to pay tax on my inherited IRA assets?

You generally must pay tax on inherited IRA assets. But depending on the type of IRA and the assets within it, you IRA distribution may be tax-free. Consult a competent tax advisor for information on your specific tax consequences.

Lump-Sum Distribution You may withdraw the total amount of your inherited IRA assets from the IRA. Lump-sum payments may be taken at any time.
10-Year Rule If the IRA owner died before the RBD, you may withdraw any amount at any time as long as the entire IRA balance is withdrawn by December 31 of the 10th year after the IRA owner's death. If the IRA owner died on or after the RBD, you must take annual life expectancy payments for the first nine years - and a total distribution by December 31 of the 10th year after the IRA owner's death.
Single Life Expectancy Payments If taking single life expectancy payments, you generally must take annual distributions of a minimum amount based on your single life expectancy, beginning December 31 of the year following the year of the IRA owner's death. Spouse beneficiaries may delay payments until the year the IRA owner would have turned age 73.**
Spouse Beneficiaries If you're a spouse beneficiary, you may transfer or roll over inherited assets to your own IRA. The proposed RMD regulations, however, may impose certain restrictions, so it's important to discuss your options with a competent advisor.

See a competent advisor

The beneficiary distribution options can be complicated, especially after the SECURE Act changes that took effect January 1, 2020. If you inherit an IRA, discuss your options with a competent advisor to decide on which option best suits you.

For more information

We expect to receive additional guidance on the new SECURE Act changes. Please contact TrueCore by calling 740-345-6608 or emailing info@truecore.org for assistance with questions.

*See your financial organization or the IRA document for options that apply if the IRA owner died before January 1, 2020.

**The SECURE 2.0 Act of 2022 raised the RMD age from 72 to 73 for 2023 and later tax years. As of this writing, it is unclear what effect this change will have on the deadline for a spouse beneficiary to
delay payments.