An inherited IRA or an IRA of your own?

A surviving spouse may keep an inherited IRA as a beneficiary rather than elect ownership. Beneficiary distribution rules depend on factors including whether the spouse is the sole beneficiary, the account type, and whether the owner died before or after the required beginning date. A beneficiary distribution due to death generally has an exception to the 10% additional tax for early distributions, but ordinary income tax may still apply.

Under Publication 590-B, a surviving spouse who is the sole beneficiary and has an unlimited right to withdraw can elect to treat the inherited IRA as their own. A qualifying rollover into the spouse's own IRA can also be possible. Ownership changes which distribution rules apply. A withdrawal from your own IRA before age 59½ may face an additional tax unless an exception applies.

For deaths after 2019, many designated beneficiaries who are not eligible designated beneficiaries are subject to a ten-year distribution rule. A surviving spouse is an eligible designated beneficiary and may have life-expectancy and spouse-specific options. Certain other beneficiaries also qualify for special rules. A non-spouse beneficiary generally cannot treat an inherited IRA as their own or roll it into their own IRA, although a properly titled trustee-to-trustee transfer can be possible.

Where a ten-year rule applies, annual distribution requirements can depend on whether the owner died before or after the required beginning date. In applicable after-death cases, annual RMDs can be required in years one through nine as well as full distribution by year ten. Current IRS guidance, including SECURE 2.0 spouse provisions, should be checked for the particular year.

Ask about any remaining year-of-death RMD, the year of death, sole-beneficiary status, traditional versus Roth treatment, and the custodian's account agreement. Roth distribution tax treatment has its own requirements, including a five-year rule. This guide does not select an option or calculate a distribution.

These are three different checks. A distribution can be included in taxable income even when an exception removes the early-distribution additional tax. An RMD is a distribution obligation, not a separate account or a guarantee of a particular tax bill. A transfer or ownership election does not erase a remaining distribution requirement. Before an account change, ask for a comparison that identifies the account type, applicable beneficiary category, timing of required distributions and possible taxes. Publication 590-B supplies the rules; this guide does not calculate an amount.