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Inherited (beneficiary) IRA accounts

  • The beneficiary or "Inherited" IRA account types are intended to be used for those specific accounts that are passed to a beneficiary upon the death of the original owner. These account types have special rules around required distributions.
  • For example, a non-spouse beneficiary has two primary options for distributions from a traditional Inherited IRA account: they could take distributions from the account over their lifetime based on the IRS life expectancy tables, or they could take the entire account balance within five years of the date of death of the original owner (with no required distributions yearly - simply a requirement that they distribute the entire balance of the account within those five years).
  • A spouse who inherits an IRA can either roll it into their own IRA and have the same tax and required distribution treatment as if it were their own IRA, or could use an inherited IRA and use one of the two methods described above for non-spouse beneficiaries.
  • The life expectancy method can be used for both spousal and non-spousal beneficiaries. A non-spousal beneficiary will be required to start distributions immediately, and a spousal beneficiary could delay distributions until age 70.5, as prescribed by IRS rules.
  • If the 5 year method selected you will need to enter the distribution percentage by year, separated by commas, as discussed in the tool tip for the Distribution Schedule field. This will indicated how much of the account is intended to be distributed in which year, since there is not an annual minimum requirement for distributions using this method.