Things You Need To Know Before You Start Spending Your Inheritance

Receiving an inheritance is a blessing, and it’s important you protect the wealth your loved one transferred to you. Listen to the RMD rules I’m about to share.

When you inherit an IRA, RMD rules fall into three categories–spouse, non-spouse, and entities like say a trust or estate.

If you received the IRA from your spouse: you can move the money into your personal IRA and RMDs won’t kick in until you’re 72. This gives you more time to grow your money BUT you can’t take a distribution before age 59 1/2, or a 10% early withdrawal penalty may await you If you want to withdraw the funds now, consider moving the assets into an inherited IRA as you won’t be penalized. However, the amount of RMDs you can withdraw is based on your age.

If you received an IRA inheritance as a non-spouse and your loved one passed away on or after January 1st of 2020, you’ve got to clear the account within 10 years of your loved one’s death. There is a special alternate distribution structure if you are a minor, disabled, chronically ill, or are no more than ten years younger than your loved one.

If your loved one didn’t have anyone listed as a beneficiary for the IRA then the IRA will pass to their estate. It will take some time before the funds will pass to anyone listed in the will and this is the least tax advantageous way for the assets to pass.

Be sure to make a decision about next steps, because if you don’t take RMDs in time, Uncle Sam is coming for 50% of the amount you should have withdrawn. If after explaining this you still have a question mark hovering over your head, *crickets* talk to a tax professional or your favorite certified financial planner.

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About the Host

Rianka R. Dorsainvil

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.