Forbes recently discussed some possibilities for beneficiaries of IRAs, including the good deals and the bad deals in "What To Do If You Inherit an IRA."
While inheriting an IRA account can be great news for some, it can also turn to bad news, if the beneficiaries make the wrong decisions about what to do with those accounts.
The single most important thing for the beneficiary to keep in mind is that an inherited IRA can be the source of lifetime payments or it can be a source of a very large and immediate tax bill.
If you are smart, then you will want it to be the former, unless you absolutely need a large sum of money right away.
The general rule of thumb is that you should never take more out of an inherited IRA than you are absolutely required to take by law. It is recommended that you take no more than the required minimum distribution.
Exactly how much that is, will depend on several factors.
Before you make a decision on an inherited IRA, it would most likely be beneficial to consult an attorney.
If you are the owner of the IRA and want to pass it down to your beneficiaries, the important thing for you as the owner to keep in mind is that an inherited IRA is not exempt from the beneficiary’s creditors’ claims under federal law if the beneficiary files for bankruptcy. Under state law, it varies.
There is planning you can do as the owner to protect your IRA for your beneficiaries. Talk to an experienced estate planning attorney about your options.
Reference: Forbes (July 10, 2017) "What To Do If You Inherit an IRA."