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Beneficiary IRA? What is it?

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What is an inherited IRA? Can the beneficiary make contributions?

An inherited IRA is an IRA which is used to pay out the decedent’s IRA to his/her beneficiaries. A spouse may treat the IRA as his/her own, but a non-spouse will always inherit the IRA and either take total distribution or set up for payout out of the account. Distributions will be coded “Due to Death” so that the beneficiary will not have any IRS-imposed 10% penalty. The beneficiaries will have to pay taxes owed on the money distributed but no penalty. We typically set up an inherited IRA by an internal transfer into the beneficiary or beneficiaries’ names. On an inherited IRA there are no contributions only distributions.


Learn more about Deborah Crawford’s webinar Inherited IRAs and Death Distributions - Including a deeper dive into the SECURE Act

First published on 07/05/2020

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