Understanding required minimum distribution (RMD) rules
- Your age
- The original account owner’s date of birth
- If you inherited the account timely or untimely
- Your relationship to the account owner
- If the account owner was in pay or not in pay
Inheriting an IRA from someone who isn’t your spouse (for example, a parent)
- You’re the spouse of the original account owner.
- You’re not more than 10 years younger than the original account owner.
- You’re chronically ill or disabled according to the IRS definition.
- You’re a minor child of the original account owner.
Inheriting an IRA from your spouse
Inheriting an IRA from an entity (for example, a trust or estate)
Inheriting an inherited account
Inheriting a Roth IRA or workplace retirement plan
What happens with other types of inherited accounts?
Glossary of common terms for inherited IRAs
- Beneficiary: The beneficiary is the person who will receive the money when an account holder passes away. A beneficiary may be a spouse, another person (nonspouse beneficiary), or a trust or entity. Different types of beneficiaries have different options for handling the money.
- Eligible designated beneficiary (EDB): EDBs are a type of beneficiary that can only apply in situations where the original depositor passed away on or after January 1, 2020. They are the spouse, the minor child of the original depositor, a disabled or chronically ill person, or an individual that is not more than 10 years younger than the original depositor.
- Entity: A beneficiary who is not a person, such as an estate, a charity, or a non-look-through or non-see-through trust.
- Traditional IRA: An IRA (individual retirement arrangement) is a type of retirement savings account with tax advantages. In a traditional IRA, contributions may be tax-deductible.
- Roth IRA: A Roth IRA is a kind of retirement savings account with tax advantages. Because contributions are made with after-tax dollars, future withdrawals will be tax-free, as long as the account is at least 5 years old. With a Roth IRA, you can withdraw contributions without penalty at any time, for any reason.
- Inherited IRA: An inherited IRA, sometimes called a beneficiary IRA, has a unique purpose. Inheritors of retirement accounts move their inheritance into an inherited IRA to maintain tax status and ensure withdrawal rules are followed.
- RMD: A required minimum distribution (RMD) is a mandatory withdrawal from tax-deferred retirement accounts that starts when the account owner reaches the age of 73. Timing may differ for inheritors.
- Required beginning date: The date by which an individual must take their first RMD from their traditional IRA. This is April 1st of the year after the individual reaches RMD age.
- Inherited timely: The timing of moving inherited assets into your inherited account can play a role in determining your distribution rules. For an inheritance to be timely, it needs to be moved into your name by December 31 of the year after the original account owner passed away.
- Inherited untimely: If the inheritance is not moved into your inherited account by December 31 the year after the original account owner passed away, then it was inherited untimely.
- Rollover: A rollover is a transfer of assets from one retirement account to another without having to pay taxes.
- Disclaim: To disclaim means that you give up your right to receive an inheritance. If you choose to do so, whatever assets you were meant to receive are passed along to the next designated beneficiary.