Inheriting an IRA creates important tax decisions that affect how much of your inheritance you ultimately keep. The rules depend on your relationship to the original owner, whether they had begun required minimum distributions, and when they passed away. Making the wrong choice can accelerate taxes unnecessarily, while the right strategy may help spread those taxes over several years.
An inheritance is money or property that transfers to another individual or entity due to the death of the donor. Inherited assets can be cash, stocks, bonds, retirement accounts, real estate, a business and property.
The IRS allows taxpayers who are age 70.5 and older to make donations to qualified charities directly from their IRAs known as Qualified Charitable Distributions or QCDs.
It takes careful planning in the years leading up to your 73rd birthday to reduce the amount of your RMD and the erosion caused by income taxes.
The Roth IRA turns traditional IRA rules upside down. By paying tax on the money you contribute to your account, you receive tax free growth in retirement.
If you have a tax-deferred retirement account, the IRS will eventually require you to begin taking withdrawals. These mandatory withdrawals are called Required Minimum Distributions or RMDs.