Individual Retirement Accounts (IRAs) are savings plans that allow you set aside money for retirement. Contributions to a traditional IRA are tax deductible, but contributions to a Roth IRA are not. Because of the tax ramifications, you should consult with an elder law attorney to explore and discuss your options if you inherit an IRA.
If you inherited an IRA from a spouse, you can elect to put the IRA in your name or roll it over into a new IRA. You can withdraw from it once you reach 70½. You could leave the IRA in your deceased spouse’s name, however, you couldn’t withdraw from it until the time he or she would’ve have turned 70½ or a year after his or her death if they were already 70½. You also have the “five-year rule” option, where you completely empty the IRA account–and pay the taxes–by the end of the fifth year after your spouse’s death.
The rules for children, grandchildren or non-spouses who inherit an IRA are different from those of a spouse. There are also factors to consider if a trust is named as beneficiary of an IRA. Have your attorney explain the specifics in both cases if you choose to leave an IRA to a child or grandchild or leave it in a trust.
