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Receiving an inheritance is a big deal, but how do you maximize your new asset and what should you do with it?
If you inherit an IRA from a spouse, you probably have the most flexibility because you can take it on as your own, or roll it over.
If you inherit an IRA as a designated beneficiary, you can transfer it into an inherited IRA and you’ll have ten years to take all your distributions. Or you can open an inherited IRA in your name and take required minimum distributions over your expected lifetime if you’re chronically ill, disabled, or no more than ten years younger than your loved one.
When you Inherit a Roth IRA, you shouldn’t owe taxes as they were paid before the money was deposited into the account. The exception to this rule is if the original owner’s account wasn’t open for at least 5 years before they passed.
Keep in mind that when inheriting a traditional, SIMPLE, rollover, or SEP IRAs, you’ll have to pay income taxes on whatever amounts you withdraw.
Knowing the effect of each decision can help you choose the option that works best for you. I’m sure most of us can.
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Rianka R. Dorsainvil, CFP®️ is the Co-Founder and Co-CEO of 2050 Wealth Partners a virtual, fee-only comprehensive financial planning firm dedicated to serving first-generation wealth-builders, entrepreneurs, and thriving professionals. Rianka also hosts 2050 TrailBlazers, a podcast aimed to address the lack of diversity in the financial planning profession by engaging industry experts and leaders in conversation.
As an award winning successful, millennial Certified Financial Planner professional, Rianka offers a unique perspective not only on the current state of the financial service industry, but on how to stay relevant in an ever-changing world.
Rianka serves as a member of CNBC’s Digital Financial Advisor Council and CFP Board’s Diversity Advisory Group, is a Forbes Personal Finance Contributor, and has been recognized for her accomplishments and leadership within the industry by leading publications and organizations such as Investment News’ inaugural 2017 Women to Watch Rising Star and Wealth Management’s Ten to Watch in 2018. She has been published in PBS NewsHour, Forbes, USA Today, Black Enterprise, CNBC, Women’s Health, and more.