Ep. 57 Inherited IRA from a Parent? Avoid HUGE Penalties! Son/Daughter Guide to Distributions & Taxes
Receiving an inheritance can be a profound financial gift, especially as you look towards or enjoy retirement. Yet, when that inheritance is a Traditional IRA from a parent, it comes with a unique set of complex rules and potential pitfalls that could jeopardize your financial peace of mind and trigger substantial penalties. This episode is your essential guide for simplifying IRS regulations.
We’re delving into the intricate landscape of inherited IRAs, providing sons and daughters with a crucial guide to managing a Traditional IRA from a parent. It's an essential discussion designed to equip you with the knowledge and strategies to avoid huge penalties and secure your financial future.
Tune in to discover the complex IRS regulations surrounding inherited IRAs, understand the critical "10-year rule," and learn precisely when annual distributions are mandatory. We'll also cover the key factors that determine your distribution rules and provide practical tips to navigate the tax implications with confidence.
Whether your parent had started taking RMDs or not, we’ll simplify the steps to ensure compliance and optimize your tax strategy.
This episode is for anyone who has inherited a Traditional IRA from a parent and wants to understand the complex rules to avoid hefty penalties and effectively manage their inherited wealth for retirement. It's especially valuable for sons and daughters seeking clear, practical guidance on IRA distribution rules and tax implications.
Listen To The Episode:
What You’ll Learn:
The difference between the 10-year rule and lifetime distribution options for inherited IRAs.
How to determine if your parent had started required minimum distributions (RMDs) and what it means for you.
The impact of the Secure Act 2.0 on inherited IRA rules, especially for deaths after December 31, 2019.
How to avoid a 25% penalty by taking RMDs correctly and on time.
Strategies for spreading out withdrawals to reduce your tax burden.
Special considerations for minor children, disabled, or chronically ill beneficiaries.
How to check if your parent took their RMD in the year of their death to avoid additional penalties.
Ideas Worth Sharing:
If your parent hadn’t started RMDs, you have 10 years to withdraw the entire IRA balance, spread it out to avoid a big tax hit.
Missed RMDs can cost you a 25% penalty; check your parent’s statements to ensure compliance.
For pre-2020 inherited IRAs, you may still have the stretch IRA option, allowing lifetime distributions.
Consider voluntary withdrawals within the 10-year window to stay in a lower tax bracket.
If you’re a minor inheriting an IRA, you can stretch distributions until age 21, then the 10-year rule kicks in.
Resources:
Eric Maldonado, CFP®, MBA: (805)250-4552 | info@aquilawealth.com | Website | Contact Us
IRS Retirement Plans: Official information on inherited IRA rules and required minimum distributions (RMDs).
RMD Calculators: Use online tools to calculate your RMDs based on your life expectancy and account balance
Disclosure: Aquila Wealth Advisors, LLC is a registered investment advisor in the state of CA, LA, and in other jurisdictions where exempt. All content on this podcast is for information purposes only. All information or ideas provided should be discussed in detail with an advisor, accountant, or legal counsel prior to implementation.
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