New rules for inherited IRAs
Is it true that the new law allows you to roll over an inherited
IRA from anyone?
Not exactly. Under the former rules (the new rules took effect in
2007), if you inherited a traditional IRA from anyone other than
your deceased spouse, you could not treat the inherited IRA as your
own. This means that you could not make any contributions to the
IRA. It also means you could not roll over any amounts into or out
of the inherited IRA.
Like the original owner, you generally would not owe
tax on the assets in the IRA until you receive distributions from
it. Unlike an inherited IRA from a spouse, you must begin receiving
distributions from the IRA under the rules that apply to beneficiaries.
This generally means that you have to start taking income from the
IRA soon after inheriting it.
Beginning in 2007, a direct transfer from a deceased
employee's IRA, qualified pension, profit-sharing or stock bonus
plan, annuity plan, tax-sheltered annuity (Section 403b) plan, or
governmental deferred compensation (section 457) plan to an IRA
set up to receive the distribution on your behalf can be treated
as an eligible rollover distribution if you are the designated beneficiary
of the plan and not the employee's spouse. The IRA is treated as
an inherited IRA.
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