A minor child cannot inherit an IRA outright. The other choice is to leave the IRA to a trust, which would allow you to dictate how your heirs use the money after you die. If you choose to designate your young grandchild as the beneficiary, you can name your adult child or another trusted person as the custodian.

What happens to an inherited IRA upon death?

IRA beneficiaries may be required to take required minimum distributions, which can be a taxable event. Non-spousal beneficiaries must withdraw all funds from an inherited IRA within 10 years of the original owner’s death.

What are the new rules for inherited IRAs?

There are two major changes under the new SECURE Act rules in 2020 and beyond: Unlike Roger (above), Inherited IRA account owners are not required to take Required Minimum Distributions. Inherited IRA account balances must be fully withdrawn within ten years of inheritance.

What happens when an adult child inherits an IRA?

The tax benefits disappear forever once you distribute cash from an inherited IRA, with the distribution amount being characterized as taxable income. While the Stretch provision is gone for the majority of adult children, it is important to distribute this inherited IRA in the most tax-efficient manner, based on your individual circumstances.

Can a beneficiary withdraw money from an inherited IRA?

Inherited IRA account balances must be fully withdrawn within ten years of inheritance. While a beneficiary isn’t required to continue RMDs, he/she can no longer stretch out distributions and control the tax obligations over their lifetime.

Who is allowed to inherit an IRA from a non-spouse?

Inherited IRA from a Non-Spouse. Inherited IRA Rules for Non-Spouse Beneficiaries. As the U.S. population ages, it is common to inherit an IRA from mom or dad, an aunt or uncle, or even a sibling or friend.