The Rules Around Inherited IRAs (and How to Avoid Tax Surprises)
This Week’s Story
A prospective client recently came to me with a big question:
“I just inherited my dad’s IRA. What do I do with it?”
It’s a moment that brings both emotion and uncertainty. Losing a loved one is hard enough, but the IRS doesn’t pause for grief. Understanding how to handle an inherited IRA can save thousands in taxes and keep you out of trouble with Uncle Sam.
Money Rule of the Week: Know the 10-Year Clock
When you inherit a traditional IRA, remember this: your parent never paid taxes on that money. That means the IRS eventually will want its share.
Here’s what you need to know:
If your parent hadn’t yet taken their Required Minimum Distribution (RMD) for the year they passed away, you must take it for them.
If your parent was already taking RMDs, you must continue taking them annually based on your life expectancy and fully deplete the account by the end of year 10.
If they weren’t of RMD age, you still have to empty the account within 10 years—but you can choose when and how to take withdrawals during that period.
The big takeaway: you will pay taxes. The goal is to do it smartly.
Quick Takeaways
✅ Retitle the account correctly: It must become an “Inherited IRA” or “Beneficiary IRA.”
🧾 Expect a 1099-R: Any withdrawals are taxable as ordinary income on your return.
🧮 Plan your tax strategy: Work with a CPA and financial planner to coordinate withdrawals efficiently and avoid unnecessary penalties.
Beer of the Week
Deschutes Mirror Pond Pale Ale (Bend, OR)
Balanced, classic, and steady—just like your inherited IRA strategy should be. Patience and consistency will serve you far better than rushing into big decisions.
Podcast Tie-In
On this week’s Beer and Money Podcast, I break down the rules around inherited IRAs—what to do, what to avoid, and how to make sure you don’t trigger unnecessary taxes.
🎧 Listen now: Beer and Money
Your Move
Get Your Financial Scorecard: Find out how your overall plan stacks up —Scorecard
Book a Meeting: Have questions about an inherited account? Schedule with me
Closing
Dealing with inherited money isn’t just about numbers...it’s about honoring a legacy and making sure that wealth goes where it’s meant to.
Cheers,
Ryan Burklo