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Started By
Message
Funds inherited from an IRA
Posted on 1/19/26 at 12:01 pm
Posted on 1/19/26 at 12:01 pm
We are slowly working through the sale and distribution of assets from my parent's estate. My mom had a small IRA she hadn't completely distributed to herself. The amount is relatively small, adding about 1% to my portfolio, but the IRS rules won't allow me to take the distribution, tax deferred, into my IRA. If I want to do that then I have to create a new Inherited IRA account and manage it separately.
In the learned opinion of the board, is this just more effort than it's worth, because at age 70, I'm going to have only three years then start minimum distributions and keep up with it or face those stupid fines.
Or should I just suck it up and take the full distribution, pay the taxes and not worry about it?
In the learned opinion of the board, is this just more effort than it's worth, because at age 70, I'm going to have only three years then start minimum distributions and keep up with it or face those stupid fines.
Or should I just suck it up and take the full distribution, pay the taxes and not worry about it?
10
Posted on 1/19/26 at 12:10 pm to HubbaBubba
How much are you talking about? You don’t have to take it all at once.
Posted on 1/19/26 at 12:13 pm to HubbaBubba
For 1% of your current portfolio, is the tax amount on the full distribution worth the headache of taking the steps to avoid it?
I have no experience in this sort of transfer so I do not have "product knowledge" to advise in that regard, but I do know that if it was barely a drop in the bucket at age 70, I'm taking the path of least resistance.
I have no experience in this sort of transfer so I do not have "product knowledge" to advise in that regard, but I do know that if it was barely a drop in the bucket at age 70, I'm taking the path of least resistance.
Posted on 1/19/26 at 12:13 pm to HubbaBubba
It's not that difficult. You can get on the Vanguard site(or any other large brokerage site) and set up the account. The site will calculate the required distribution at the end of each year. You just need to pull the money out each year before 12/31 and deplete the account over 10 years.
Posted on 1/19/26 at 12:13 pm to HubbaBubba
I’m no expert but I believe that the SECURE Act changed the requirements for inherited IRA’s. Distributions are different than traditional IRA’s.
I was in a very similar position with a small inherited IRA. I just spaced the annual distributions until I hit 73 years of age to minimize the tax hit in one year.
I was in a very similar position with a small inherited IRA. I just spaced the annual distributions until I hit 73 years of age to minimize the tax hit in one year.
This post was edited on 1/19/26 at 12:28 pm
Posted on 1/19/26 at 12:46 pm to HubbaBubba
quote:
at age 70
As I get older, I am trying to consolidate and simplify finances. If abilities start to slip, a small account may be forgotten or overlooked.
If it's a relatively small amount, I'd probably just cash out and pay the taxes rather than add one more thing to remember and manage.
Posted on 1/19/26 at 12:58 pm to HubbaBubba
If it is only 1% of your portfolio, cash it and pay the taxes now.
Posted on 1/19/26 at 2:21 pm to HubbaBubba
Typically you'd have 10 yrs to fully distribute. So, you could space that out to optimize taxes and extend tax differed status as long as possible. Your RMDs wouldnt be a factor unless you hit R!D age before 10 yrs but if she was already taking RMDs or required to you'd have to continue them.
I'd probably spread out distributions if that avoids spilling into higher brackets and/or extend tax differed status as long as feasible. Better yet, if you anticipate a low tax bracket year in next 10, take it then for lowest rate.
1% of portfolio is a paltry sum with no impact on your tax brackets, I might just distribute it and move on.so you dont have to take care of it before 10 yrs hits.
I'd probably spread out distributions if that avoids spilling into higher brackets and/or extend tax differed status as long as feasible. Better yet, if you anticipate a low tax bracket year in next 10, take it then for lowest rate.
1% of portfolio is a paltry sum with no impact on your tax brackets, I might just distribute it and move on.so you dont have to take care of it before 10 yrs hits.
Posted on 1/19/26 at 3:04 pm to HubbaBubba
Without knowing how much money it is no one can help you here.
Posted on 1/19/26 at 4:16 pm to HubbaBubba
You have 10 years.
You will have to take RMDs.
Can you somehow resign that part of the inheritance and have the account go to one of your children or a charity?
These may be paths to avoid taxes for you.
You will have to take RMDs.
Can you somehow resign that part of the inheritance and have the account go to one of your children or a charity?
These may be paths to avoid taxes for you.
Posted on 1/19/26 at 5:15 pm to makersmark1
quote:If that's doable I'd have it go to my son while he's in college. I'll have to check that out with the investment company to see if I can assign it to my son instead of me.
Can you somehow resign that part of the inheritance and have the account go to one of your children or a charity?
These may be paths to avoid taxes for you.
Posted on 1/19/26 at 5:22 pm to makersmark1
quote:
You will have to take RMDs.
Not necessarily. RMDs are only required if owner had already reached RBD (Required Beginning Date) before death.
Posted on 1/19/26 at 5:26 pm to TorchtheFlyingTiger
quote:She was 91. She was taking RMD's.
Not necessarily. RMDs are only required if owner had already reached RBD (Required Beginning Date) before death.
Posted on 1/19/26 at 5:28 pm to HubbaBubba
Disclaiming the inherited asset may be the right play but be aware you dont determine who it goes to. I think it passes to contingent beneficiaries or estate. In essence it gets treated as if you pre deceased the account owner. So it may go to another sibling, the estate charity etc depending on if another primary or contingent beneficiaries were designated.
This post was edited on 1/19/26 at 5:30 pm
Posted on 1/19/26 at 5:50 pm to TorchtheFlyingTiger
quote:
because at age 70, I'm going to have only three years then start minimum distributions
Is the OP 70 now?
I may have read this wrong.
Under new rules inherited IRAs must be emptied with in 10 years, and IF the person had started RMDs you have to do that as well.
The account is registered at an “inherited IRA.”
Check with whoever you use as to how to facilitate this.
Posted on 1/19/26 at 5:52 pm to TorchtheFlyingTiger
quote:
Disclaiming the inherited asset may be the right play but be aware you dont determine who it goes to. I think it passes to contingent beneficiaries or estate. In essence it gets treated as if you pre deceased the account owner. So it may go to another sibling, the estate charity etc depending on if another primary or contingent beneficiaries were designated.
^this is all true
Disclaiming is easier IF you are an only child or your family is reasonable.
Posted on 1/20/26 at 8:07 am to HubbaBubba
Take the distribution, now or between now and age 72.
Pay the tax.
Take what’s left after tax, and use that to pay the tax on a Roth conversion from your own IRA
Example, 10k inherited Ira distribution, 30 percent marginal combined fed/state tax
You get 7k after tax
7k/.30 =23.333
Use the 7k to pay tax on 23k conversion from your own Ira
Pay attention to changing tax or Medicare premium brackets
Pay the tax.
Take what’s left after tax, and use that to pay the tax on a Roth conversion from your own IRA
Example, 10k inherited Ira distribution, 30 percent marginal combined fed/state tax
You get 7k after tax
7k/.30 =23.333
Use the 7k to pay tax on 23k conversion from your own Ira
Pay attention to changing tax or Medicare premium brackets
Posted on 1/20/26 at 8:38 am to LSUFanHouston
Why would you convert at a 30% marginal rate?
I realize there are situations that’s prudent but in general that’s a bad idea.
I realize there are situations that’s prudent but in general that’s a bad idea.
Posted on 1/20/26 at 9:23 am to slackster
quote:
Why would you convert at a 30% marginal rate?
30 was an easy math example
Assuming 24 fed 6 state
Many retirees find themselves in a 22 or 24 fed bracket
Considering future investment growth rates, likelihood of higher income tax rates, and depending on time horizon and future use of money (will it be left to heirs) it can absolutely make sense
Posted on 1/20/26 at 1:17 pm to makersmark1
quote:
his is all true Disclaiming is easier IF you are an only child or your family is reasonable.
We went through disclaiming an IRA. Make sure you know who the contingent beneficiaries for the IRA are, because they get the money. Also, don’t count on the IRA custodian being familiar with this. I had a very large, well known custodian tell me it couldn’t be done. After I pointed out the IRS reg they came back to me two days later and admit they were wrong.
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