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FAMILY FINANCES
November 1, 2019

Can I roll over an inherited IRA 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

There are two ways to take control of the account:
  • Treat it as your own. When you designate yourself as the account owner, the distribution rules will be the same as if you'd owned the IRA all along.
  • 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 could also take a distribution from the inherited assets and complete an "indirect" rollover. However, in that case, you'll need to deposit the money into your IRA within 60 days to avoid tax complications. (You can only do one 60-day rollover within a 365-day period.) And remember that when converting to a Roth IRA, you will have to pay taxes on the amount you convert.
In either case, the tax treatment of the inherited IRA funds will be based on your age, not your spouse's. That means you may have to pay an additional 10% tax for premature distributions, in addition to income taxes, on withdrawals before you turn 59½, and you'll have to take annual required minimum distributions (RMDs) starting at age 72.Footnote 1 Remember, if you are the spouse, any RMDs that the decedent did not satisfy must be taken before the assets can be moved to an inherited IRA or your own IRA.

When someone other than my spouse leaves me an IRA

You can't roll over the account into your own IRA, but there are a couple of other options:
  • 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. Generally, the assets will have to be distributed within 10 years of the account owner's death unless an exception applies.Footnote 2 If you meet one of the exceptions, your distributions may be impacted by the original account owner's age at the time of that person's passing, and by whether they had reached the required beginning date (RBD) for their RMDs.Footnote 1,3
"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% early withdrawal tax, 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 If you were age 70½ or older as of 12/31/2019, you would be required to take a required minimum distribution ("RMD") for 2019. Effective 1/1/2020, in accordance with new legislation, the required beginning date for RMDs for individuals who turn age 70½ on or after 1/1/20 is age 72. You may defer your first RMD until April 1st in the year after you turn age 70½ or 72, as applicable, but then you'd be required to take two distributions in that year.

Footnote 2 Distributions to individuals other than the surviving spouse of the employee (or IRA owner), disabled or chronically ill individuals, individuals who are not more than 10 years younger than the employee (or IRA owner), or child of the employee (or IRA owner) who has not reached the age of majority are generally required to be distributed by the end of the tenth calendar year following the year of the employee or IRA owner's death. (Most entity beneficiaries would not be impacted by this 10-year rule and would still follow the 5-year rule that was in effect prior to new legislation.) This applies to distributions where the decedent passed away after 12/31/2019. If the decedent passed away on or prior to 12/31/2019, you may be able to stretch the account over your life expectancy but your beneficiary who inherits the account if you die would be subject to the 10-year rule. Check with a tax advisor regarding your specific situation.

Footnote 3 The required beginning date (RBD) is in the year that the account owner turns 72. This changed in 2020 due to new legislation, so if the person was age 70½ prior to 1/1/2020, they would be required to take an RMD for 2020 and 2021. In any case, they can delay the first RMD until April 1st of the year following thier RBD, but then they'd be required to take two RMDs the following year.

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, and different types of protection from creditors and legal judgments. These are complex choices and should be considered with care. Visit our Rollover IRA page or call a Merrill rollover specialist at 888.637.3343 for more information about your choices.
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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