Types of IRAs

• Before making any decisions regarding an IRA that you inherit, be sure to understand exactly what type of IRA account it is. The two main types of IRAs are traditional and Roth. Be aware that the regulations for transfer and inheritance are different for each type. The rest of this article will provide advice for inheriting a traditional IRA, your options may be different for a Roth IRA.
  
  

Means of Transfer

• In addition to understanding what type of IRA you have received, also be sure to understand how the transfer is intended to be made. IRA's can have one or multiple beneficiaries and various means of transfer. You need to understand whether the beneficiary is an individual, the estate, a trust or a combination of these. The following advice assumes that you are the the beneficiary as an individual.
  
  

Minimum Distributions

• Because IRAs are a tax-deferred savings vehicle, the primary concern is when withdrawals are made and when taxes are to be paid. With a traditional IRA, taxes are paid when the funds are withdrawn. This affects you as the beneficiary because you will be responsible to pay the taxes on withdraws made from the account. Even if you do not need to make withdraws for income, you need to understand that IRAs have mandatory withdraws starting at age 70 1/2 depending on age and life expectancy calculations.
  
  

If Required Withdrawals Have Begun

• The next step to determine the required withdraw amount is to determine if withdraws have already begun. If required withdraws have already begun, you will generally base the ongoing calculation for minimum withdraws on the longer of your life expectancy or the previously calculated life expectancy of the owner, minus one year.
  
  

If Required Withdrawals Have Not Begun

• If required withdraws have not begun and you are the sole beneficiary, you will generally switch the calculation to use your life expectancy. See the Resources section for the Table 1 life expectancy calculations.
  
  

Child Vs. Spouse Beneficiary

• Generally, when a spouse receives the transfer of an IRA as a beneficiary, if the spouse is below 70 1/2 they can elect to assume ownership of the IRA and treat it as their own. However, this is true only for spouses. When a child inherits and IRA he or she does not have the option to maintain the account and treat it as their own, they are the beneficiary of the account distributions only.