Are there RMDs for inherited IRAs?
Inherited IRAs, also known as rollover IRAs or inherited IRAs, are retirement accounts that are passed down to beneficiaries after the original account holder’s death. These accounts offer certain tax advantages, but one common question among beneficiaries is whether they are subject to Required Minimum Distributions (RMDs). The answer to this question depends on the type of inherited IRA and the relationship between the original account holder and the beneficiary.
Understanding Inherited IRAs
An inherited IRA is essentially a continuation of the original IRA, with some differences in terms of withdrawal rules. There are two main types of inherited IRAs: a traditional IRA and a Roth IRA. Each type has its own set of rules regarding RMDs.
Traditional Inherited IRAs
For traditional inherited IRAs, RMDs are generally required. However, the rules differ depending on the relationship between the original account holder and the beneficiary. Here’s a breakdown of the RMD rules for different types of beneficiaries:
1. Spouses: If the deceased account holder left their IRA to a spouse, the surviving spouse can either take RMDs based on their own life expectancy or treat the inherited IRA as their own. If the surviving spouse is the sole beneficiary, they can delay taking RMDs until the year they turn 72.
2. Non-spouse beneficiaries: Non-spouse beneficiaries, such as children, grandchildren, or friends, must begin taking RMDs the year following the original account holder’s death. The RMD amount is based on the beneficiary’s life expectancy, as determined by the IRS Single Life Expectancy Table.
3. Charitable beneficiaries: If the inherited IRA is left to a charity, the charity is not subject to RMDs. However, the charity must take the entire account balance by the end of the fifth year following the original account holder’s death.
Roth Inherited IRAs
For Roth inherited IRAs, RMDs are not required until the end of the fifth year following the original account holder’s death. This rule applies to all beneficiaries, including spouses. However, if the Roth IRA was inherited by a non-spouse beneficiary, they can choose to take RMDs based on their life expectancy, similar to traditional inherited IRAs.
Conclusion
In summary, the answer to whether there are RMDs for inherited IRAs depends on the type of IRA and the relationship between the original account holder and the beneficiary. Traditional inherited IRAs generally require RMDs, while Roth inherited IRAs have more flexibility regarding RMDs. It’s essential for beneficiaries to understand these rules to ensure they comply with tax regulations and make informed decisions about their inherited IRAs.
