How Long Do You Have to Rollover an Inherited IRA?
Understanding the rules surrounding inherited IRAs is crucial for anyone who has inherited one. One of the most common questions is, “How long do you have to rollover an inherited IRA?” The answer to this question can have significant tax implications and financial planning considerations. In this article, we will delve into the timeframes for rolling over an inherited IRA and the factors that may affect your decision.
Firstly, it’s important to note that the time frame for rolling over an inherited IRA varies depending on your relationship with the original IRA owner. If you are the surviving spouse of the IRA owner, you have the option to treat the inherited IRA as your own. In this case, you can rollover the inherited IRA into your own IRA without any time constraints. However, if you are not the surviving spouse, the rules are different.
For non-spouse beneficiaries, the deadline to rollover an inherited IRA is generally within 60 days from the date of the original IRA owner’s death. This 60-day window is intended to give you ample time to make a decision on how you want to manage the inherited IRA. If you fail to rollover the inherited IRA within this timeframe, you may be subject to taxes and penalties.
It’s worth mentioning that there are exceptions to the 60-day rule. For example, if you are unable to rollover the inherited IRA within the 60-day period due to unforeseen circumstances, such as a medical emergency or natural disaster, you may be granted an extension by the IRS. However, you must request the extension in writing and provide a valid reason for the delay.
Once you have decided to rollover the inherited IRA, you have several options. You can rollover the entire balance into your own IRA, or you can transfer a portion of the funds into a new IRA. It’s important to note that you cannot rollover an inherited IRA into a Roth IRA directly. However, you can convert the inherited IRA to a Roth IRA by paying taxes on the funds at the time of conversion.
Another important consideration is the distribution schedule for inherited IRAs. Non-spouse beneficiaries are required to take minimum required distributions (MRDs) from the inherited IRA each year, starting the year following the original IRA owner’s death. The distribution schedule is based on your life expectancy, as determined by the IRS life expectancy tables. Failing to take the required distributions can result in penalties and potential tax liabilities.
In conclusion, the time frame for rolling over an inherited IRA is generally 60 days for non-spouse beneficiaries. However, it’s crucial to understand the rules and options available to ensure you make the best decision for your financial future. Consulting with a financial advisor or tax professional can provide you with personalized guidance and help you navigate the complexities of inherited IRAs.
