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FAMILY FINANCES
MAY 18, 2022

Can I roll over an IRA that I inherit into my own IRA?

Answered by
Debra Greenberg
Director, Personal Retirement Strategy and Solutions, Bank of America
The short answer is yes, if you inherit the IRA from a spouse. But a rollover to your own IRA is not allowed if you inherit the IRA from anyone else.Footnote 1
Before we dive in, keep in mind that tax rules surrounding inherited IRAs are complicated, and it's easy to make mistakes. So be sure to consult a tax advisor before making any decisions.

When my spouse leaves me an IRA

If you inherit the IRA from your spouse, there are two ways to take control of the account. Please note: The spouse must make the election by the later of (1) December 31st of the calendar year in which they attain age 72, or (2) December 31st of the year following the calendar year of the IRA owner's death. If the surviving spouse wishes to treat the IRA as their own after that deadline, the surviving spouse will need to calculate and withdraw "hypothetical RMDs" to account for the time period that passed since the death.
  • Treat it as your own. When you elect to treat the decedent's IRA as your own IRA, the distribution rules will be the same as if you'd owned the IRA all along. You can only make this election if you are the sole beneficiary of the IRA and have an unlimited right to withdraw amounts from it.
  • Roll it into an existing IRA. If you already have an IRA, you can roll over the inherited assets to another traditional IRA in your name or convert the assets to a Roth IRA. The simplest way to do that is through a direct, trustee-to-trustee transfer from one account to the other or between one IRA custodian and another. You also could complete an "indirect" IRA-to-IRA rollover, where you take a distribution from the inherited assets and then "roll" those assets into your own already-existing IRA. However, in that case, you'll need to deposit the money into your IRA within 60 days of receiving the distribution to avoid potential adverse tax consequences. You can do only one indirect IRA-to-IRA rollover within a 365-day period (transfers and "conversions" or rollovers from traditional IRAs to Roth IRAs are not subject to the limit). And remember that when converting to a Roth IRA, you will have to pay taxes on the amount you convert to the extent that the funds have not been previously taxed as income.
In either case, the tax treatment of the IRA funds that you inherit generally will be based on your age, not your spouse's. That means you may have to pay an additional 10% federal tax for premature distributions, in addition to income taxes, on withdrawals before you turn 59½, unless an exception applies, and you'll generally have to take annual required minimum distributions (RMDs) starting at age 72 the required beginning date.Footnote 1 Remember, if you are the spouse, any RMDs that the decedent did not satisfy for the year of the decedent's death generally must be taken before the assets can be moved to your own IRA.
If you are a spouse inheriting an IRA, you alternatively can choose to treat the IRA as an inherited IRA in the same manner as a non-spouse, as described below.

When someone other than my spouse leaves me an IRA

  • Open an "inherited IRA" account. As the name implies, inherited IRAs are created specifically for accounts that someone else leaves you. The account remains in the name of the deceased, and you are the beneficiary which means that you will not be able to make any additional contributions to the inherited IRA.
You do not have the option to roll over the account into your own IRA, and your choices for distributing the value of the account will depend on whether you're considered an "Eligible Designated Beneficiary" (EDB). An EDB is a surviving spouse, a disabled or chronically ill individual, an individual who is not more than 10 years younger than the decedent, or a child of the account owner who has not yet reached age 21. Distribution rules also will differ based on the date of the account owner's death, and whether or not the original account owner died before or after their required beginning date for Required Minimum Distributions. The rules are complex and distributions have tax implications. You should consult your personal tax advisor regarding your specific situation before making any decisions.
"Tax rules surrounding inherited IRAs are complicated, and it's easy to make mistakes. So be sure to consult a tax advisor before making any decisions."
— Debra Greenberg, Director, Personal Retirement Strategy and Solutions, Bank of America
  • Withdraw the money. If you take a lump-sum distribution, you won't be subject to the additional 10% federal tax on early withdrawals, even if you're younger than 59½, but you will need to pay income tax on the amount that is taxable.
Regardless of the path you choose, it bears mentioning again that consulting a tax advisor is the best way to ensure that you're adhering to the complicated tax rules that govern inherited IRAs.
Ready to get started?
Footnote 1 The required beginning date for RMDs is age 72. You may defer your first RMD until April 1st in the year after you turn age 72, but then you'd be required to take two distributions in that year. Failure to take all or part of an RMD results in a 50% additional tax applicable to the amount of the RMD not withdrawn. Consult your tax advisor for more information on your personal circumstances.

An RMD is the minimum amount that a beneficiary must withdraw each year from an inherited IRA or qualified retirement plan. The calculation of RMDs for death beneficiaries is complex and depends upon a number of specific factors. Please consult your tax advisor.

Generally, for a distribution from a Roth IRA to be federal (and possibly state) income tax-free, it must be qualified. A qualified distribution from your Roth IRA may be made after a five-year period has been satisfied (this period begins January 1 of the tax year of the first contribution or the year of conversion to any Roth IRA) and you (i) are age 59½ or older, (ii) are disabled, or (iii) or qualify for a special purpose distribution such as the purchase of a first home (lifetime limit of $10,000). In situations where the original account owner is deceased, distributions to the beneficiary (or to the estate of the deceased account owner) are also considered a qualified distribution. If you receive a non-qualified distribution from your Roth IRA, the earnings portion of such distribution generally will be subject to ordinary income tax, plus a 10% early withdrawal additional tax, unless an exception applies. A 10% early withdrawal additional tax also may be owed on converted Roth IRA principal withdrawn before the end of the five-year period. Although RMDs from Roth IRAs are not required during the original account owner's lifetime, and are not required for the original account owner, RMDs would apply to the inherited IRA account.

You have choices about what to do with your employer-sponsored retirement plan accounts. Depending on your financial circumstances, needs and goals, you may choose to roll over to an IRA or convert to a Roth IRA, roll over an employer-sponsored plan from your old job to your new employer, take a distribution, or leave the account where it is. Each choice may offer different investment options and services, fees and expenses, withdrawal options, required minimum distributions, tax treatment (particularly with reference to employer stock), and different types of protection from creditors and legal judgments. These are complex choices and should be considered with care. For more information visit our rollover page or call Merrill at 888.637.3343.
Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
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