What to Do When You Inherit a Retirement Account

July 10, 2013

As a Personal Family Lawyer®, I am often asked to help people who inherit a retirement account. The action you need to take with an inherited IRA depends upon your unique situation; the IRS has rules for each and recently announced that they will be cracking down on taxpayers who make mistakes with inherited IRAs. Here are some inherited IRA scenarios and options for each:

If the account you inherit was a 401(k) or traditional IRA and the decedent was at least 70 ½ years old: Contact the financial institution that holds the account to determine if the decedent had already taken the required minimum distribution for the year they died. If they did not, you will need to do so.

If you are the spouse of the deceased account owner:
You can roll an inherited IRA into your own IRA to postpone taking distributions until you turn 70 ½. If you take distributions before you turn 59 ½, you may be subject to early withdrawal penalties. You can also leave it where it is and postpone taking the required minimum distribution until your deceased spouse would have turned 70 ½.

Leave a Reply