If you are inheriting an IRA or retirement account from someone who is not your spouse, it is important that you realize that there are special rules that apply to non-spouse beneficiaries, including your children and grandchildren. (If you haven't done so, be sure to read our other article entitled, “What Should Non-Spouse Beneficiaries Know About Inheriting an IRA”.)
It's important to understand that the consequences can be devastating if the wrong decisions or actions are made! Below are 3 key tips to help you and your friends, family and loved ones better navigate the complex world of inherited IRAs for non-spouse beneficiaries.
TIP #1: Touch NOTHING!
As a non-spouse beneficiary, it would be best to err on the side of caution and not touch anything initially before you are aware of all of your options. If you take a distribution, as a non-spouse beneficiary, you will immediately be faced with a large tax bill and no ability to rollover that distribution or undoing it!
TIP #2: Contact the IRA Custodian.
First and foremost, before doing anything, you should contact the IRA custodian where the IRA or retirement account is held. You will first want to verify that the account is properly titled as an inherited IRA. You do have the ability to move the inherited IRA to a new IRA custodian; however, it must be done by something known as a trustee-to-trustee transfer.
TIP #3: Seek Professional Guidance.
Before you do anything with the inherited IRA, seek the guidance of a qualified professional (attorney, financial advisor, IRA custodian) to properly guide you through the next steps and processes. These qualified professionals can ensure that you do not do anything that can be disastrous to you and your loved ones!
If you want to learn more about the SECURE Act, which changed many of the rules with respect to IRAs, be sure to attend our upcoming FREE informational seminar entitled, “Protect Retirement Accounts Passing to Children” on Thursday, December 9th at our main office in Lancaster. For more information and to register, click here.