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Inherited IRA

An Inherited IRA, or a Beneficiary IRA, is an account that is opened when someone inherits an IRA or employee-sponsored retirement plan after the death of the original owner. As a beneficiary, you can’t make additional contributions, but with an Inherited IRA the funds can remain tax-deferred, and you can generally withdraw money right away without a penalty. Inherited IRAs are typically opened for non-spouse beneficiaries, as spouses can transfer inherited assets directly into their own personal retirement accounts (although spouses can open an inherited IRA as well if they choose).

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The rules for if/when you must begin taking Required Minimum Distributions and/or distribute all the account assets depend on your beneficiary classification:

  • Eligible Designated Beneficiary (spouse or minor child of the original account holder, or an individual that is disabled, chronically ill or no less than 10 years younger than the original account holder)

  • Designated Beneficiary (most other individuals)

  • Non-Designated Beneficiary (trusts and organizations)

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