Normally, retirement plan distributions made to a nonspouse beneficiary after the
account owner's death are taxable at the time they are received and cannot be rolled
over to the beneficiary's own IRA. However, employer-sponsored retirement plans are
required to offer nonspouse beneficiaries the option to roll over inherited amounts
tax-free in a direct (trustee-to-trustee) rollover to an inherited IRA. No taxes will
be due on the inherited IRA rollover until the beneficiary receives a distribution
from the inherited IRA. An inherited IRA is an IRA that has been acquired by a
beneficiary on the death of someone other than a spouse.
The following special rules apply to an inherited IRA:
- The IRA must be a brand-new IRA set up for the specific purpose of receiving the
- The IRA must be specially titled in the deceased account owner's name.
- No other contributions may be made to the IRA.
- No other amounts may generally be rolled into or out of the IRA.
- Minimum required distributions will need to be made over the beneficiary's life
expectancy starting the year after the IRA owner's death.
This publication is distributed with the understanding that the author, publisher and
distributor are not rendering legal, accounting or other professional advice or
opinions on specific facts or matters, and, accordingly, assume no liability
whatsoever in connection with its use. The information contained in this newsletter
was not intended or written to be used and cannot be used for the purpose of (1)
avoiding tax-related penalties prescribed by the Internal Revenue Code or (2)
promoting or marketing any tax-related matter addressed herein. © 2015