Beneficiary IRA Rules

After an account holder passes away and all rights are transferred to the account’s beneficiary, most of the rules of the IRA still apply to the new owner. Of course there would be additional factors to consider after you inherit a certain IRA account. Let’s say you are going to inherit a Roth IRA account then you should first take a look into its pre-existing rules.

Roth IRA Rules

Those who receive compensations taxed by the government are eligible to open a Roth IRA. Taxed compensations include salaries, wages, bonuses, tips, professional fees and all other forms of pay for giving services to individuals. Learn more the of Roth IRA rules now.

Contribution Limits

Account holders will have a maximum contribution of $5,000 ($6,000 for 50 years old and up). Anyone can contribute fully to Roth as long as they don’t exceed the income limits that are set by the IRS.

  1. For single filers, head of households and married individuals not living in the same house and filing separately should have at least $107,000 and utmost $122,000 for their modified adjusted gross income to be able to contribute fully to Roth.
  2. Joint filers should have at least $169,000 and utmost $179,000 for their MAGI to be permitted a full contribution with Roth.
  3. Married individuals living together and filing separately will have a maximum limit of $10,000 for their MAGI to be allowed a full contribution.

Withdrawal Rules

If you want to enjoy its tax-free withdrawal feature, you should know the Roth IRA withdrawal rules. To avoid the 10% penalty for early withdrawals you must take out money out of the account not before reaching 59 ½ years old and not before 5 tax years from establishment of account. Other exemptions to the 10% penalty are: withdrawals after permanent disability of account owner; withdrawals after account owner’s death; withdrawals for paying medical and educational expenses; withdrawals for first home purchase assistance; withdrawals for paying IRS levies; and withdrawals for insurance premiums.

Inherited IRA Rules

After inheriting one, beneficiary IRA rules should be considered seriously. Some of the inherited IRA rules that are to be put into account are the following;

  1. Beneficiary Form – To be able to stretch the benefits from an inherited IRA with your lifespan, the original account owner should have fully accomplished the beneficiary form. Failure to do so will cause minor to major complications for the beneficiaries of the account.
  2. Other Assets – Other assets could not be commingled with inherited IRA’s and same goes with IRA’s inherited from different persons. You can only consolidate IRA’s inherited from one person and so long that it is of th same type (Roth IRA with Roth IRA, or Traditional IRA with Traditional IRA).
  3. 60-Day Rollover – This rule allows you to borrow money out of your IRA without paying any taxes or fees as long as you return it on or before the 60th day after you borrowed the money. To make it simple, you pay for what you owe along with the fees and taxes.
  4. 10% penalty – Early withdrawal penalties shall not be imposed with inherited IRA’s. You can readily withdraw money from your inherited IRA’s anytime.

These are just the basic rules for inherited IRA’s. Try to read more information from the net or consult a financial adviser in your locality. Assistance from the broker where the original owner established the account should also be your first option.

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