That Secure act helps ensure that you keep less of your family's money and that the government gets more of it. That was a lousy stealth move by the government to pass that law.
My mom passed away this week. And now I find out that our stupid asshole government has just screwed her and me over! Our government is ran my sleaze balls!
Excellant video and very timely for me as my Uncle passed in February and left me an IRA he had. Well researched and presented clearly and concisely; well done!
Thank you so much for this video it was extremely helpful in figuring out my inherited IRA! I was even able to call Greenbush and speak with Michael Ruger directly! He gave excellent advice and was extremely knowledgeable. I highly recommend them!
You have no idea how much misinformation I am getting about Beneficiary IRAs from Financial Institutions. I finally had to find out for myself....so thanks for the video.
I just inherited a IRA this year and know nothing about it. I was told by the guy handling my IRA to leave it alone. It seemed as if he was giving me the brush off by using a bunch of big words trying to explain to me what the IRA does and why not to touch the money. I was not trying to take money, I simply wanted to understand why the IRA was losing money. I'm still very confused. However this video did clarify some things. I now know I have 10 years to take the money out, and I have to plan with my accountant the best way to avoid heavy taxation. I'm still not aware of what IRA do and why my IRA is losing money.
Hi Eric. Feel free to reach out to me at 518-477-6686 and I’ll try to answer any questions that you have about your IRA. (Comment is for education. Not advice)
The new rules worked out for me. I inherited an IRA in 2020 while still working and in the top tax bracket. RMD penalties have been forgiven for 2020 through 2024 so I saved vs the old stretch rules. Now I have 6 years to empty the account while I am retired and in a low bracket emptying the account before SS kicks in.
Yes, thank you. Roth IRA's as well. The SECURE Act was a way to generate more taxes for the government. Even though you don't pay taxes as a beneficiary of a Roth, they don't want you to accumulate tax free money for long periods of time. (Comment is for education. Not advice)
@@drewpolinchak8756 There is no tax on Inherited Roth distributions. Also, just to clarify, there aren't any RMDs unless you qualify for an exception. You can distribute IRA and Roth funds however you want provided the accounts are fully liquidated prior to 10 years.
This is such a great gift from you...I will be deploying my common sense using your excellent expertise.. I'm 60, still working. I will put max in my 401K this year and years to follow..This year my over 50 years of age max allowed to my 401K is $27,000.00 per year. I make 54K a year. Bingo, half my earned income goes in 401 K...My pre AGI of the other 27K from working remains taxable. If I do a distribution from the inherited traditional IRA of 5 K for the year, then my 27K+5K IRA distribution equals 32K pre AGI.. 32K minus 13K standard deduction brings my Adjusted Gross Income to 19K for the tax year...Let me know if my cock-a-many math is true...I figure I'd owe about 15 percent in federal taxes on 19k which amounts to $2,750 ...GOOD EFFECTIVE TAX RATE..
Assuming that someone is employed and won't retire in the next ten years. Would it make sense to leave the inherited 401k/ira untouched until the last few years before it needd to be depleted? Granted, the taxable amount would be greater because the withdrawals at that point will be higher, but at the same time the funds would have grown so much that even if you have to pay more taxes you end up with more money after taxes ? Thoughts?
If you have a significant other named as beneficiary and they are 10 years younger or less, you can still stretch inherited IRA. you mentioned siblings or cousin in your description but a girlfriend, boyfriend , or anyone that is 10 years or less younger.
Any Individuals who are not more than 10 years younger than the decedent are granted the exception and can continue utilize the stretch option (Comment is for education. Not advice)
If I inherited something like this honestly I’d switch my own 401k to a high percentage and try to MAX out my own 401k for the next 10 years. So it doesn’t boost my taxable income by much. Assuming they didn’t have 2 million in it 😂.
The IRS reg changing the RMD 10 rule are still in proposed format and have not been finalized yet. We actually expected them to be finalized by now but to our knowledge have not been. As soon as the regs are finalized we will update the video. (Comment is for education. Not advice)
Information is out-of-date based on IRS Notice 2022-53. I believe the IRS now plans to require RMD’s in Years 1-9 of the 10 Year Rule for non-spouse inherited IRA’s and Roth IRA’s, if the person the account was inherited from was taking RMD’s from the account.
As of 7/9/23, the new rags are still in proposed format, and I’ve not been finalized yet. We are still waiting on the final RMD rule change from the IRS. (Comment is for education. Not advice)
Thank you so much for this very informative video. I’ve been stressing about this for weeks, this is all a completely different language to me. My mother passed away about 3 weeks ago in 2022 and she had an IRA that was going to be given to me and my Two sisters. For the passed few days my sisters have been asking me what my plan of action was going to be with the money when it gets separated. My original plan of thought was too take it all out and pay off some minor debts, also to save some for security and the rest to leave into a CD. As of now after watching your video, the best plan of action would be to only take out some and spread it over the ten year period. How would I find out if any minimum distributions are needed to be made if I transfer it to my own inherited IRA. I also read something that stated if the owner who passed away didn’t make there minimum contribution for the year before passing, we as beneficiaries would have to fork out the 50% of the contribution for that year,is that correct? Not sure if I read that currently in the article I saw online. Thanks again for the information, you listen so much weight off my shoulders. 🙏🏻😃
Hi Kelsee. Thank you for the great feedback. To answer your questions, if your mom was over the age of 72 or would have turned 72 in 2022, the beneficiaries have to take a distribution in 2022 for the amount of the RMD (required minimum distribution) that she would have received. If she was under the age of 72 in 2022, no RMD is needed. Once you have moved the money to your inherited IRA you are subject to the 10 year rule. You have full flexibility how you want to take the money out each year over the 10 year period. There is no requirement to take an RMD from your inherited IRA each year but as you mentioned it may make sense from a tax standpoint to spread the taxable distributions over the 10 year period.
So my parent passed and had a 403 b my plan is to take out a certain amount each year but also contribute that same amount in to my own retirement fund (457) to advoid paying extra taxes
If your brother passed away in May 2019, you would still have the stretch option available to you. If you would like additional info on the stretch provision, feel free to call me at my office 518-477-6686 (Comment is for education. Not advice)
Great video! Thanks, Michael! Say, may I ask what are YOUR thoughts on my situation? :) A beloved friend (not spouse) who died in 2002 at the age of 63, had me as her beneficiary for her Pension Plan (not an IRA or 401k). Those funds (45K) were just sitting there, unbeknownst to me, untouched, and growing since 2002. So, having discovered its existence, the full amount was just now rolled over (untaxed) into an newly opened "Inherited IRA" (not Roth or Trad). She would have been 83 years old right now, and I just turned 59 (just as my wife). SO, what are the RULES/OPTIONS on withdrawing money from this "Inherited IRA" funded with retirement money from a death in 2002? I sort of understand that in this specific case, THE OLD RULES APPLY, and not the new Secure Act law, BUT WHAT are those OLD RULES in this specific case, and what TAX IMPLICATIONS/STRATEGIES apply here? My wife and I make about 30k filing jointly in SC.
If I inherited one and I open my. Inherited account will that money will also grow tax free for the next years?.and can I contribute into that account?
If you open an inherited IRA and rollover the decedents IRA or 401K into your inherited IRA, depending on what it's invested in, it can continue to grow tax deferred. However, you are not allowed to make contributions to an inherited IRA account. (education, not advice)
My spouse inherited an IRA from her mother and my spouse was grandfathered into using the stretch provision for minimum distribution over her lifetime. However, my spouse is now terminally ill and I will be inheriting this IRA that she inherited from her mother. Will I be grandfathered to use the stretch provision as my spouse used over her lifetime or will I be put into the 10 year distribution? Michael, help!
So if one of two recipients of an inherited IRA was under Medicaid and disabled, does their distribution go towards Medicaid recovery? And if that recipient had recently passed after 2020 before the distributions have been paid out, would that go to that person's beneficiaries? Or would it still be paid out to medicaid? Thanks for all the lovely information!
Great video. Thanks for the content. Like you stated at the end if you are concerned about additional ordinary income taxes paid from an inherited 401K there are some available strategies. The caveat is that you will pay taxes on this now or later. These are ways to give you more time and lessen the tax liability for a year and actually draw down the balance. If you aren't retired and you have a pretax 401K option that you currently don't make maximum contributions to you can increase your contribution rate to the maximum which is a little over $20K that would offset the distribution. If you currently have a Roth you can stop contributions to it and setup a traditional IRA and put in up to $6K-7K (less what you have already contributed to your Roth) then deduct that amount when you file taxes. If you're married you can contribute to a spousal IRA if they don't work or their existing IRA if your spouse is working. If your spouse is working and has pretax retirement options then those can be increased. If you're self employed with no additonal workers discuss with your advisors about a SEP IRA which you can contribute about 60K or 25% of your compensation whichever is less. If these options aren't available and you have to draw down contributions then at least put this money to good use. After putting away the additional tax amount pay down high interest loans, put money aside for home imorovements. Look for home upgrades that can provide state and federal tax credits, etc. If you're concerned about student aid eligibility then put the remainder in 529 plan.
You are referencing the federal estate tax exemption amount but that does not prevent a pre-tax retirement account from being taxable to the beneficiaries. If you estate was above the estate limit, the estate would have a tax liability AND the beneficiaries would have to pay tax on the pre-tax retirement accounts (Comment is for education. Not advice)
@jus10_mar10 Step up in basis does not apply to pre-tax retirement accounts like Inherited 401(K) or Inherited Trad IRAs (Comment is for education. Not advice)
I'm in a stretch option from the pre tax plan in 2016. Can I now take out half of my lump some without the 10% penalty?? I'm jobless so it really wont be crazy if I claim it as income
You can distribute any amount you would like. There are no maximum amount restrictions. They only have those RMD’s that you are required to take out each year. But any amount you take out would be subject to income taxes if it’s a Traditional inherited IRA. (Comment is for education. Not advice)
My Mom died December 2019 and left me her 401k. I was told I have to empty the account within 5 years of her death, and take out RMD's. Last year the government had no RMD's. What's the best way to take out my inherited 401k?
Thank you. No, the 10% early withdrawal penalty does not apply to inherited IRA distributions because they are coded as “death distributions” (Comment is for education. Not advice)
so, my mother who is 86 is the beneficiary of my sister's 401K who passed away after Jan.2020. She has early stages of dementia. Would that be considered terminal illness and what would be her best option going forward? I mean her "lifetime" isn't very long , probably. Should just take lump or stretch? thanks.
There are some additional questions we need to ask to provide a recommendation. Feel free to call our office and ask for Rob 518-477-6686 (Comment is for education. Not advice)
So if someone older than 59.5 years dies and leaves their kid their Roth IRA, that money is taxed once the person that inherited the money starts taking distributions?
No, distributions from Roth IRA‘s are not taxable even to beneficiaries (as long as the original owner and The beneficiary meat the five-year holding requirement) (Comment is for education. Not advice)
I'm beneficiaries of inheritance on behalf of my step daughter. but then they asking me to pay 3600 forex exchange. from ghana? do i need to pay this forex tax exchange ..then how i make sure about it...
I inherited a non spousal IRA in 2020. Because I was responsible for an Alzheimer patients funds, I stopped the RMD for account to (because of the CARES act) to preserve funds in the IRA, Now that I inherited, will I have to pay the RMD before the end of the year?
If the person passed away in 2012, the beneficiary of that IRA would be grandfathered in under the old stretch rule. However, there could be additional issues if the inherited IRA was not established by the beneficiary by 12/31/13. They may be locked into the 5 year rule. I would need to know what happened between 2013 - 2022 to provide better guidance. (Comment is for education. Not advice)
Michael, Can I transfer an inherited IRA which is currently grandfathered in under the stretch provision to another institution and have it maintained under the stretch provision?
Is it practical to name a minor's trust as beneficiary of an IRA? In other words, if the decedent's 10 year old child would otherwise inherit, but the decedent had the foresight to change the beneficiary of his IRA from his 10-year old child to a minor's trust (to avoid having to go to court to appoint a guardian of the child's property), could the trustee of that minor's trust disburse the RMD's into the trust until the child turns 18, then disburse the remainder to the minor's trust within the next 10 years (after age 18)? The whole intent of the decedent was to avoid family going to court to appoint a guardian of the child's property and to make distributions at the ages of the child according to the decedent's wishes.
State DB plans all depend on the survivor benefit that was voluntarily selected by the employee. But if a beneficiary was given the withdrawal option to rollover the balance to an IRA, then the new 10 year rule would still apply. (Comment is for education. Not advice)
@@greenbushfinancialgroup Thanks for the response! I'm am accountant so I know the tax consequences. The plan selected was to take a lesser monthly payment, and whatever (NPV) amount is left in the period of 15 years would be paid to the beneficiaries, which would be direct decendent non spouse. Just wanted to see if the 10 year rule applied so the tax hit isn't all on the same year. Maybe, From what you said if that ever happens the state would present you with a rollover option if it qualifies. Its the state of PA. Very informative well presented videos by the way.
So i just inherited a 401k, can i pay those taxes as i recieve a distribution or do i need to save that money that would go to taxes an wait till tax season? I have no clue wtf iam doin really lol
If you are non-spouse beneficiary of a 401(k, you have 10 years to distribute the money from the account. You choose how much you want to take out each year. If they are pre-tax dollars in the 401(K) account, the distributions are taxed as ordinary income in the year that you receive them. You can either withhold taxes at the time the distribution takes place or wait until tax time to remit the taxes. If you decide to wait on remitting the taxes, you should consult with a tax advisor about whether or not you will have to make estimated tax payments prior to the tax filing date. (Comment is for education. Not advice)
That's fucked up, so if your grandfather died and leaves his IRA to his grandchild. And if the grandchild is 1 years old, then ok well the one year old got tils he is 10 to get the money out of there.
With "Option 1" using the 10 year rule, does a beneficiary mean they obtain title to the IRA and have to take distribution in 10 years? Are there any estate taxes paid when title is transferred to the beneficiary ? Or are taxes only paid by the beneficiary when they take distributions ?
The beneficiary has to fully distribute the balance within 10 years, beginning the calendar year following the decedent's date of death. The beneficiary only pays tax on the money when they received distributions from the account. (Comment is for education. Not advice)
It depends on the size of the estate but currently individuals have a $11M federal estate tax exemption. The state estate limits vary state by state. Unless they had a very large estate most likely estate tax would not be due. (Comment is for education. Not advice)
If you keep them invested after you inherit the account then then depending on the performance of the investments, the account can continue to grow (Comment is for education. Not advice)
@annieluish Because you were older than your brother, you are grandfathered in under the old RMD rules so you can take RMD"s over your lifetime as opposed to having to deplete the account in 10 years. (Comment is for education. Not advice)
For the sibling that is an exception to the care act, do they have 10 years after they 70 like a minor or full lifetime? And can they setup more than one beneficiary IRAs to more easily share with other non beneficiary siblings?
The beneficiaries have to be assigned prior to the IRA owners passing away. But you can name more than one non-spouse beneficiary. If you were within 10 years of age of the decedent, you are still eligible to rollover the account into an inherited IRA and take small RMD's over your lifetime. (Comment is for education. Not advice)
@@greenbushfinancialgroup Thanks so much. If the IRA company will not change the beneficiaries (though the sole beneficiary giving up claim, etc), does it make sense to ever roll the IRA into the estate that is in probate (as instead of one beneficiary pulling out over several years, you have a few sisters with several kids each able to pull it out over 5 years and there is no debt on the estate for many more total years of deductions in those 5 years).
you explained really well and i understood up to a certain point.. I'm going to seek a tax advisor/accountant to help me. I'm a filmmaker, I can only understand but so much lol... by any chance might you know about how much a tax advisor/accountant would cost to help me sort out the inheritance/IRA stuff?
@@greenbushfinancialgroupthanks... Now, let's say, i happen to have at the age of 65 2.5 million in the 401k.....how much of that 2.5 mill can i convert yearly into the Roth IRA considering that my ans spouses social security income is 50k a year. Is there a infome limit? Can i convert 40k a year into the Roth every year and in addition to my 50k from SS, i take out 85k of the 401k (total yearly kncome 175k) ?
If the person passed away prior to 12/31/19, as the beneficiary you still have the ability to setup an inherited IRA until 12/31/20 (Comment is for education. Not advice)
When does the 10 year start? When we got the inherited IRA or from the beginning of the secure act a year ago? My fiance got an inherited ira with about 25k in it back in about 2013. It has since doubled in size and we are just now wondering what the best course of action is.
How long inherited IRA transfer to beneficiary IRA? I have been waiting for transfer 2 months so far E-trade. But still not yet transferred. When I called them and ask somethin is wrong? they say my files are all ok. Than why it take so long to transfer?
That Secure act helps ensure that you keep less of your family's money and that the government gets more of it. That was a lousy stealth move by the government to pass that law.
My mom passed away this week. And now I find out that our stupid asshole government has just screwed her and me over! Our government is ran my sleaze balls!
They been robbing us blind since the war, TAXATION is theft
Lots of nonsense on UA-cam. Not this video. It was clear, concise and gave me all the information I need. Thank you!
Finally! Easy to understand the “lingo” and tax advantages/disadvantages. Thank you!
You made this so easy to understand. Lots of confusion because my dad passed away December of 2019. Thank you!
The most accurate, exhaustive and pithy explanation of SECURE just about anywhere on the web. Kudos and keep up the insightful segments!
Wow, thanks soooo much for this informational video. You're doing an incredible job.
Excellant video and very timely for me as my Uncle passed in February and left me an IRA he had. Well researched and presented clearly and concisely; well done!
Ive called prudential 8 times and this video broke it down better for me than anyone I was on the phone with.
Thanks Nick!! (Comment is for education. Not advice)
This was super good! Better than a majority of the videos on UA-cam that covers this topic
Thank you so much for this video it was extremely helpful in figuring out my inherited IRA! I was even able to call Greenbush and speak with Michael Ruger directly! He gave excellent advice and was extremely knowledgeable. I highly recommend them!
You have no idea how much misinformation I am getting about Beneficiary IRAs from Financial Institutions. I finally had to find out for myself....so thanks for the video.
Thank you for the help! young FA working at large firm this is the best help I’ve found
I have been way"over thinking"my new inheritance until now.
Thank you so much for explaining this.I feel so much more at ease.
I just inherited a IRA this year and know nothing about it. I was told by the guy handling my IRA to leave it alone. It seemed as if he was giving me the brush off by using a bunch of big words trying to explain to me what the IRA does and why not to touch the money. I was not trying to take money, I simply wanted to understand why the IRA was losing money. I'm still very confused. However this video did clarify some things. I now know I have 10 years to take the money out, and I have to plan with my accountant the best way to avoid heavy taxation. I'm still not aware of what IRA do and why my IRA is losing money.
Hi Eric. Feel free to reach out to me at 518-477-6686 and I’ll try to answer any questions that you have about your IRA. (Comment is for education. Not advice)
Thanks for dropping this knowledge. Very interesting & easy to understand.
The new rules worked out for me. I inherited an IRA in 2020 while still working and in the top tax bracket. RMD penalties have been forgiven for 2020 through 2024 so I saved vs the old stretch rules. Now I have 6 years to empty the account while I am retired and in a low bracket emptying the account before SS kicks in.
Don't forget about Inherited Roth IRAs, surprisingly these are included in mandatory RMDs as well!
Yes, thank you. Roth IRA's as well. The SECURE Act was a way to generate more taxes for the government. Even though you don't pay taxes as a beneficiary of a Roth, they don't want you to accumulate tax free money for long periods of time. (Comment is for education. Not advice)
Thanks for this comment . . . it's just the information I was looking for.
Do Roth IRA beneficiaries have to pay income tax on distribution--or just RMD for 10 years?
@@drewpolinchak8756 There is no tax on Inherited Roth distributions. Also, just to clarify, there aren't any RMDs unless you qualify for an exception. You can distribute IRA and Roth funds however you want provided the accounts are fully liquidated prior to 10 years.
Very informative and concise besides saving me a lot of time to peruse all these rules on the IRS.gov.. . Thanks!!!
Clear and concise. Thank you.
This is such a great gift from you...I will be deploying my common sense using your excellent expertise.. I'm 60, still working. I will put max in my 401K this year and years to follow..This year my over 50 years of age max allowed to my 401K is $27,000.00 per year.
I make 54K a year. Bingo, half my earned income goes in 401 K...My pre AGI of the other 27K from working remains taxable.
If I do a distribution from the inherited traditional IRA of 5 K for the year, then my 27K+5K IRA distribution equals 32K pre AGI..
32K minus 13K standard deduction brings my Adjusted Gross Income to 19K for the tax year...Let me know if my cock-a-many math is true...I figure I'd owe about 15 percent in federal taxes on 19k which amounts to $2,750 ...GOOD EFFECTIVE TAX RATE..
Excellent well explained. It’s about time someone answered all my questions. Thank you
easy to follow and helpful, thanks!
Great stuff. I'm in this boat right now.
There are RMDs now.
Thanks so much for this amazing video!!
Great clarity! Nice work.
This video is very helpful. Thank you much for sharing.
THings have drastically changed since this video was made. So make sure you're current.
Assuming that someone is employed and won't retire in the next ten years. Would it make sense to leave the inherited 401k/ira untouched until the last few years before it needd to be depleted? Granted, the taxable amount would be greater because the withdrawals at that point will be higher, but at the same time the funds would have grown so much that even if you have to pay more taxes you end up with more money after taxes ? Thoughts?
Great clear video. Does it matter if you inherited via an estate versus as a beneficiary?
If you have a significant other named as beneficiary and they are 10 years younger or less, you can still stretch inherited IRA. you mentioned siblings or cousin in your description but a girlfriend, boyfriend , or anyone that is 10 years or less younger.
Any Individuals who are not more than 10 years younger than the decedent are granted the exception and can continue utilize the stretch option (Comment is for education. Not advice)
This "new rule" eliminating the "stretch" is monumental. What administration put this into action, me wonders?
Thank you for this video.
If I inherited something like this honestly I’d switch my own 401k to a high percentage and try to MAX out my own 401k for the next 10 years. So it doesn’t boost my taxable income by much. Assuming they didn’t have 2 million in it 😂.
Now that's an interesting idea. I never thought about doing this!
This is out of date. IRS regs changed the RMD rule for beneficiaries where the decedent was already taking RMD's.
The IRS reg changing the RMD 10 rule are still in proposed format and have not been finalized yet. We actually expected them to be finalized by now but to our knowledge have not been. As soon as the regs are finalized we will update the video. (Comment is for education. Not advice)
Information is out-of-date based on IRS Notice 2022-53. I believe the IRS now plans to require RMD’s in Years 1-9 of the 10 Year Rule for non-spouse inherited IRA’s and Roth IRA’s, if the person the account was inherited from was taking RMD’s from the account.
As of 7/9/23, the new rags are still in proposed format, and I’ve not been finalized yet. We are still waiting on the final RMD rule change from the IRS. (Comment is for education. Not advice)
Excellent work superb
excellent video.
Thank you so much for this very informative video. I’ve been stressing about this for weeks, this is all a completely different language to me. My mother passed away about 3 weeks ago in 2022 and she had an IRA that was going to be given to me and my
Two sisters. For the passed few days my sisters have been asking me what my plan of action was going to be with the money when it gets separated. My original plan of thought was too take it all out and pay off some minor debts, also to save some for security and the rest to leave into a CD. As of now after watching your video, the best plan of action would be to only take out some and spread it over the ten year period. How would I find out if any minimum distributions are needed to be made if I transfer it to my own inherited IRA. I also read something that stated if the owner who passed away didn’t make there minimum contribution for the year before passing, we as beneficiaries would have to fork out the 50% of the contribution for that year,is that correct? Not sure if I read that currently in the article I saw online. Thanks again for the information, you listen so much weight off my shoulders. 🙏🏻😃
Hi Kelsee. Thank you for the great feedback. To answer your questions, if your mom was over the age of 72 or would have turned 72 in 2022, the beneficiaries have to take a distribution in 2022 for the amount of the RMD (required minimum distribution) that she would have received. If she was under the age of 72 in 2022, no RMD is needed. Once you have moved the money to your inherited IRA you are subject to the 10 year rule. You have full flexibility how you want to take the money out each year over the 10 year period. There is no requirement to take an RMD from your inherited IRA each year but as you mentioned it may make sense from a tax standpoint to spread the taxable distributions over the 10 year period.
So my parent passed and had a 403 b my plan is to take out a certain amount each year but also contribute that same amount in to my own retirement fund (457) to advoid paying extra taxes
Surprisingly interesting.
Thank you so much❣️❣️❣️
My brother passes away May 2019 whish option 1 or 2. I am the heir of his ira and 401k I am still in probate.
If your brother passed away in May 2019, you would still have the stretch option available to you. If you would like additional info on the stretch provision, feel free to call me at my office 518-477-6686 (Comment is for education. Not advice)
DOES THIS APPLY TO 401K PLANS STARTED IN 1990'S ? ? ? FOR INHERITANCE TO GROWN KIDS
Great video! Thanks, Michael!
Say, may I ask what are YOUR thoughts on my situation? :)
A beloved friend (not spouse) who died in 2002 at the age of 63, had me as her beneficiary for her Pension Plan (not an IRA or 401k). Those funds (45K) were just sitting there, unbeknownst to me, untouched, and growing since 2002. So, having discovered its existence, the full amount was just now rolled over (untaxed) into an newly opened "Inherited IRA" (not Roth or Trad). She would have been 83 years old right now, and I just turned 59 (just as my wife).
SO, what are the RULES/OPTIONS on withdrawing money from this "Inherited IRA" funded with retirement money from a death in 2002?
I sort of understand that in this specific case, THE OLD RULES APPLY, and not the new Secure Act law, BUT WHAT are those OLD RULES in this specific case, and what TAX IMPLICATIONS/STRATEGIES apply here? My wife and I make about 30k filing jointly in SC.
In my case I have a Living Trust as beneficiary of my 403b. This doesn't seem to apply to me
So what's happens if they don't get the money out in time ?
IRS penalties (Comment is for education. Not advice)
If I inherited one and I open my. Inherited account will that money will also grow tax free for the next years?.and can I contribute into that account?
If you open an inherited IRA and rollover the decedents IRA or 401K into your inherited IRA, depending on what it's invested in, it can continue to grow tax deferred. However, you are not allowed to make contributions to an inherited IRA account. (education, not advice)
How do I find a smart tax advisor? I’m in California.
My spouse inherited an IRA from her mother and my spouse was grandfathered into using the stretch provision for minimum distribution over her lifetime. However, my spouse is now terminally ill and I will be inheriting this IRA that she inherited from her mother. Will I be grandfathered to use the stretch provision as my spouse used over her lifetime or will I be put into the 10 year distribution? Michael, help!
I’m the beneficiary of my mom’s thrift savings account and I’m 57 what can I do . Roll it into a Roth ?
If it’s a pre tax account in the thrift savings, it would have to go to a pretax inherited Ira. (Comment is for education. Not advice)
So if one of two recipients of an inherited IRA was under Medicaid and disabled, does their distribution go towards Medicaid recovery? And if that recipient had recently passed after 2020 before the distributions have been paid out, would that go to that person's beneficiaries? Or would it still be paid out to medicaid? Thanks for all the lovely information!
Great video. Thanks for the content.
Like you stated at the end if you are concerned about additional ordinary income taxes paid from an inherited 401K there are some available strategies. The caveat is that you will pay taxes on this now or later. These are ways to give you more time and lessen the tax liability for a year and actually draw down the balance.
If you aren't retired and you have a pretax 401K option that you currently don't make maximum contributions to you can increase your contribution rate to the maximum which is a little over $20K that would offset the distribution. If you currently have a Roth you can stop contributions to it and setup a traditional IRA and put in up to $6K-7K (less what you have already contributed to your Roth) then deduct that amount when you file taxes.
If you're married you can contribute to a spousal IRA if they don't work or their existing IRA if your spouse is working. If your spouse is working and has pretax retirement options then those can be increased.
If you're self employed with no additonal workers discuss with your advisors about a SEP IRA which you can contribute about 60K or 25% of your compensation whichever is less.
If these options aren't available and you have to draw down contributions then at least put this money to good use. After putting away the additional tax amount pay down high interest loans, put money aside for home imorovements. Look for home upgrades that can provide state and federal tax credits, etc.
If you're concerned about student aid eligibility then put the remainder in 529 plan.
I thought a married couple has like a $25.84M tax exemption for estate tax. Why would I pay taxes on an inherited 401(k)?
You are referencing the federal estate tax exemption amount but that does not prevent a pre-tax retirement account from being taxable to the beneficiaries. If you estate was above the estate limit, the estate would have a tax liability AND the beneficiaries would have to pay tax on the pre-tax retirement accounts (Comment is for education. Not advice)
@@greenbushfinancialgroup Thank you. So would “step-up in basis” also not apply to an inherited 401(k)?
@jus10_mar10 Step up in basis does not apply to pre-tax retirement accounts like Inherited 401(K) or Inherited Trad IRAs (Comment is for education. Not advice)
@@greenbushfinancialgroup Oh I see. Thank you very much!
Could the amount from the inherited IRA, 401K, etc be rolled over into you own IRA, 401K, etc and not have to pay taxes.
If you are a spouse beneficiary “yes”. If you are a non spouse beneficiary then “no”. (Comment is for education. Not advice)
I'm in a stretch option from the pre tax plan in 2016. Can I now take out half of my lump some without the 10% penalty?? I'm jobless so it really wont be crazy if I claim it as income
What is the amount that you can take from the inherently 401k plan that I have rolled over into a IRA ? They passed away in 2016 .
You can distribute any amount you would like. There are no maximum amount restrictions. They only have those RMD’s that you are required to take out each year. But any amount you take out would be subject to income taxes if it’s a Traditional inherited IRA. (Comment is for education. Not advice)
@@greenbushfinancialgroup Thsnk you for your reply.
My Mom died December 2019 and left me her 401k. I was told I have to empty the account within 5 years of her death, and take out RMD's. Last year the government had no RMD's. What's the best way to take out my inherited 401k?
Great video! Does the 10% early withdrawal penalty apply to non-spouse beneficiaries who are under 59 1/2?
Thank you. No, the 10% early withdrawal penalty does not apply to inherited IRA distributions because they are coded as “death distributions” (Comment is for education. Not advice)
so, my mother who is 86 is the beneficiary of my sister's 401K who passed away after Jan.2020. She has early stages of dementia. Would that be considered terminal illness and what would be her best option going forward? I mean her "lifetime" isn't very long , probably. Should just take lump or stretch? thanks.
There are some additional questions we need to ask to provide a recommendation. Feel free to call our office and ask for Rob 518-477-6686 (Comment is for education. Not advice)
So if someone older than 59.5 years dies and leaves their kid their Roth IRA, that money is taxed once the person that inherited the money starts taking distributions?
No, distributions from Roth IRA‘s are not taxable even to beneficiaries (as long as the original owner and The beneficiary meat the five-year holding requirement) (Comment is for education. Not advice)
I'm beneficiaries of inheritance on behalf of my step daughter. but then they asking me to pay 3600 forex exchange. from ghana? do i need to pay this forex tax exchange ..then how i make sure about it...
I inherited a non spousal IRA in 2020. Because I was responsible for an Alzheimer patients funds, I stopped the RMD for account to (because of the CARES act) to preserve funds in the IRA, Now that I inherited, will I have to pay the RMD before the end of the year?
What about if the spouse is disabled? Do they have to take RMD?
Hello, what if the person passed in 2012 but became the beneficiary of the 401k account this year 2022? Does the grandfather rule still apply?
If the person passed away in 2012, the beneficiary of that IRA would be grandfathered in under the old stretch rule. However, there could be additional issues if the inherited IRA was not established by the beneficiary by 12/31/13. They may be locked into the 5 year rule. I would need to know what happened between 2013 - 2022 to provide better guidance. (Comment is for education. Not advice)
Michael,
Can I transfer an inherited IRA which is currently grandfathered in under the stretch provision to another institution and have it maintained under the stretch provision?
Yes, as long you originally qualified for the stretch, you can transfer it to an inherited IRA at another custodian and maintain the stretch provision
Can I inherit a traditional Ira into a Roth IRA or would I be paying double taxes
That would be considered a "conversion" and the IRA does not allow conversions for inherited Trad IRA's (Comment is for education. Not advice)
Is it practical to name a minor's trust as beneficiary of an IRA? In other words, if the decedent's 10 year old child would otherwise inherit, but the decedent had the foresight to change the beneficiary of his IRA from his 10-year old child to a minor's trust (to avoid having to go to court to appoint a guardian of the child's property), could the trustee of that minor's trust disburse the RMD's into the trust until the child turns 18, then disburse the remainder to the minor's trust within the next 10 years (after age 18)? The whole intent of the decedent was to avoid family going to court to appoint a guardian of the child's property and to make distributions at the ages of the child according to the decedent's wishes.
Do state defined benefit pension (remaining NPV amount) non- spouse beneficiaries get to use the new 10 year rule as well?
State DB plans all depend on the survivor benefit that was voluntarily selected by the employee. But if a beneficiary was given the withdrawal option to rollover the balance to an IRA, then the new 10 year rule would still apply. (Comment is for education. Not advice)
@@greenbushfinancialgroup Thanks for the response! I'm am accountant so I know the tax consequences.
The plan selected was to take a lesser monthly payment, and whatever (NPV) amount is left in the period of 15 years would be paid to the beneficiaries, which would be direct decendent non spouse. Just wanted to see if the 10 year rule applied so the tax hit isn't all on the same year. Maybe, From what you said if that ever happens the state would present you with a rollover option if it qualifies. Its the state of PA.
Very informative well presented videos by the way.
So i just inherited a 401k, can i pay those taxes as i recieve a distribution or do i need to save that money that would go to taxes an wait till tax season? I have no clue wtf iam doin really lol
If you are non-spouse beneficiary of a 401(k, you have 10 years to distribute the money from the account. You choose how much you want to take out each year. If they are pre-tax dollars in the 401(K) account, the distributions are taxed as ordinary income in the year that you receive them. You can either withhold taxes at the time the distribution takes place or wait until tax time to remit the taxes. If you decide to wait on remitting the taxes, you should consult with a tax advisor about whether or not you will have to make estimated tax payments prior to the tax filing date. (Comment is for education. Not advice)
That's fucked up, so if your grandfather died and leaves his IRA to his grandchild. And if the grandchild is 1 years old, then ok well the one year old got tils he is 10 to get the money out of there.
With "Option 1" using the 10 year rule, does a beneficiary mean they obtain title to the IRA and have to take distribution in 10 years? Are there any estate taxes paid when title is transferred to the beneficiary ? Or are taxes only paid by the beneficiary when they take distributions ?
The beneficiary has to fully distribute the balance within 10 years, beginning the calendar year following the decedent's date of death. The beneficiary only pays tax on the money when they received distributions from the account. (Comment is for education. Not advice)
@@greenbushfinancialgroup Thank you. Does the estate of the decedent owe any estate taxes for transferring title of the IRAs to the beneficiaries ?
It depends on the size of the estate but currently individuals have a $11M federal estate tax exemption. The state estate limits vary state by state. Unless they had a very large estate most likely estate tax would not be due. (Comment is for education. Not advice)
Do 403B accounts keep growing after you inherit them?
If you keep them invested after you inherit the account then then depending on the performance of the investments, the account can continue to grow (Comment is for education. Not advice)
What disability qualifies?
My brother passes away April 2021. Do I have to clean up the inherit IRA in 10 years ?
What was the age difference between you and your brother? (Comment is for education. Not advice)
@@greenbushfinancialgroup He was 57, I am 73. 1964 1948
@annieluish Because you were older than your brother, you are grandfathered in under the old RMD rules so you can take RMD"s over your lifetime as opposed to having to deplete the account in 10 years. (Comment is for education. Not advice)
For the sibling that is an exception to the care act, do they have 10 years after they 70 like a minor or full lifetime? And can they setup more than one beneficiary IRAs to more easily share with other non beneficiary siblings?
The beneficiaries have to be assigned prior to the IRA owners passing away. But you can name more than one non-spouse beneficiary. If you were within 10 years of age of the decedent, you are still eligible to rollover the account into an inherited IRA and take small RMD's over your lifetime. (Comment is for education. Not advice)
@@greenbushfinancialgroup Thanks so much. If the IRA company will not change the beneficiaries (though the sole beneficiary giving up claim, etc), does it make sense to ever roll the IRA into the estate that is in probate (as instead of one beneficiary pulling out over several years, you have a few sisters with several kids each able to pull it out over 5 years and there is no debt on the estate for many more total years of deductions in those 5 years).
you explained really well and i understood up to a certain point.. I'm going to seek a tax advisor/accountant to help me. I'm a filmmaker, I can only understand but so much lol... by any chance might you know about how much a tax advisor/accountant would cost to help me sort out the inheritance/IRA stuff?
Hi Liz. Feel free to call me at our office 518-477-6686 and I'll see if we can help. (Comment is for education. Not advice)
What if you inherit a Roth ira
Same rules. Just no tax issues because distributions are tax free. (Comment is for education. Not advice)
@@greenbushfinancialgroupthanks...
Now, let's say, i happen to have at the age of 65 2.5 million in the 401k.....how much of that 2.5 mill can i convert yearly into the Roth IRA considering that my ans spouses social security income is 50k a year. Is there a infome limit? Can i convert 40k a year into the Roth every year and in addition to my 50k from SS, i take out 85k of the 401k (total yearly kncome 175k) ?
Or is that 208k income limit for roth contribution only for pre-retired folks? If not, would that 208 include money to be transferred to Roth IRA?
Distribute it all at once and buy bitcoin
What if the person passed away in December of 2019 but the 401K was not changed into an inherited 401K until 2020?
Never mind. I finished the video and you answered my questions.
If the person passed away prior to 12/31/19, as the beneficiary you still have the ability to setup an inherited IRA until 12/31/20 (Comment is for education. Not advice)
When does the 10 year start? When we got the inherited IRA or from the beginning of the secure act a year ago?
My fiance got an inherited ira with about 25k in it back in about 2013. It has since doubled in size and we are just now wondering what the best course of action is.
The 10 year starts from the date the person you inherited the IRA from passes away
@@alfonsomoreno2735 And does the account need to be completely withdrawn by the end of those 10 years? Thanks.
Thank you!
How long inherited IRA transfer to beneficiary IRA? I have been waiting for transfer 2 months so far E-trade. But still not yet transferred. When I called them and ask somethin is wrong? they say my files are all ok. Than why it take so long to transfer?
It varies from provider to provider but two months is definitely on the longer end. (Comment is for education. Not advice)