Special Rules for Inherited IRAS



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:

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