February 2023 Client Profile

Chris was 39 years old when he inherited a traditional IRA from his grandfather. Chris is not planning to retire anytime soon, so he’s unsure what to do with the account. What are his options?

With the passage of the SECURE Act in 2019, Chris will generally need to deplete the balance of the IRA within ten years of his inheritance. And depending on his grandfather’s age at the time of his death, Chris may be required to take a required minimum distribution by December 31 of the year his grandfather passed.

Also, Chris won’t be able to make additional contributions to the IRA account or roll over the account balance to an IRA he already owns. That’s because non-spousal beneficiaries are not allowed to treat the inherited IRA as their own. He’ll need to set up a new inherited IRA unless he wants to take a lump sum distribution. At which time, he’ll receive a Form 1099-R, and the entire distribution amount will be taxed at his ordinary income rates.

Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.