If you’re not the spouse of the original IRA holder, you can’t roll the new IRA into an existing IRA. Both the transfer of the funds and the beneficiary’s first RMD must be done by December 31st of the year after the plan participant’s death in order for the beneficiary to able to use the stretch rules for the IRA. These distribution rules vary based on whether you are the spouse of the deceased owner and whether or not the decedent had already begun taking out required distributions. You do, however, have to take distributions fairly quickly. The first RMD must be taken from the newly established Inherited IRA by December 31 of that next year. Non-spouse designated beneficiaries may do a direct rollover to a properly titled inherited IRA. The good news is that you’re not subject to the 10% penalty tax if you’re younger than 59.5 when you start taking distributions. That popular option was replaced with the new 10 Year Rule which will apply to most non-spouse beneficiaries that inherit IRA’s and other types of retirements account after December 31, 2019. Inheriting an IRA from someone other than your spouse comes with certain responsibilities. Since Roger inherited her IRA, he will be required to continue his own beneficiary RMDs next year (2020) and beyond. However, inherited IRAs have their own rules when it comes to distributions. Generally, the IRS requires non-spouse beneficiaries to begin taking RMDs from the inherited assets beginning in the year following the year of death of the original owner. IRA Inheritance From a Parent, Grandparent or Older Family Member. In Roger’s case, his own RMDs were calculated and stretched out over his remaining life expectancy. In so doing, the inherited IRA owner would receive each year his or her RMD, but any remaining IRA assets in the inherited IRA would continue to benefit from years – decades – of tax-deferred (traditional) or tax-free (Roth) compounding growth. This was commonly referred to as a Stretch IRA and it allowed the beneficiary to better control the annual tax bill.

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