If you are the non-spouse beneficiary of an IRA or an employer-sponsored retirement plan, you may rollover the proceeds into an inherited IRA, providing you with benefits similar to a surviving spouse. Some beneficiaries may be able to spread required distributions over the course of their lifetime, while leaving the balance invested and continuing to grow tax-deferred.
Special Considerations for Inherited IRAs
- Inherited IRAs may only be established through a direct trustee-to-trustee transfer. If you receive the funds directly, you will be disqualified from rolling over the balance.
- Inherited IRAs must be maintained separately from other IRAs. In addition, no additional contributions may be made to an inherited IRA.
- Many retirement plans require beneficiaries to receive the entire balance by the end of the fifth year following the year of the accountholder’s death. However, by rolling the account into an inherited IRA by the end of the year following the year of death, the non-spouse beneficiary may be able to spread the required minimum distributions over their own life expectancy.