Inheritance rules

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“inherited IRA” held in your name. Note that non-spouse beneficiaries who inherit an IRA in 2020 or later now must withdraw all funds within 10 years of the original owner’s death.

Before the 2019 SECURE Act, nonspouse beneficiaries could have used an estate planning strategy (called a “Stretch IRA”) to stretch distributions over their lifetime. So, if you were a 35-year-old beneficiary in 2019, you could have stretched distributions over 48.5 years based on the IRS life expectancy tables.

While the SECURE Act eliminated this stretch option in favor of the 10year payout provision for non-spouse beneficiaries, some beneficiaries could qualify for exceptions. These include minor children, people with disabilities, the chronically sick and others.

Bottom line

Inheriting retirement accounts can be stressful. As it stands, the rules are complex and not the most userfriendly. You will want to make sure you understand all your options before making any decisions about your inheritance. It is always better to take your time with financial decisions.

Tips for heirs

When you inherit an IRA, there are many rules to follow, depending on your relationship to the account owner. A financial advisor can help you understand what you must do, as well as answer any related questions you might have. Finding a financial advisor does not have to be hard. If you are ready to find an advisor who can help you achieve your financial goals, get started now.

If you are a surviving family member of the decedent, you should learn about Social Security death benefits. You should also review what you might owe in taxes when a family member passes.

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