Hi Mark Kohler here with another two-minute tax and legal tip I'd like to talk about the stretch IRA or what to do with an
inherited IRA
Let's assume that you've been the beneficiary of a loved one's IRA that's passed away
it could be a spouse a parent a grandparent and they left you an IRA or a Roth IRA and
Now you ask yourself
What can I do now the general rule is is that you're supposed to pull that money out?
Immediately or within five years and potentially pay taxes on it, but are there options well
That's where the stretch IRA comes in let's talk about four considerations or things to think about
number one if you're a spouse and the beneficiary of your to C spouse IRA you have the most
options available you can do a variety of things and
most importantly you want to use to stretch IRA by rolling over your
Deceased spouse IRA into your own IRA you could even open a new IRA account
You can do a variety of things whether it's a Roth or traditional again
You've got the most options available as any beneficiary if it's your spouse's IRA that you're inheriting so
start with a spousal rollover and get it into your own IRA and
You don't even have to start taking distributions
You can wait and tell you're at the latest seventy and a half years old and start taking RMDs or required minimum distributions
But you don't have to start right away
You can wait and tell that later date
So again as a spouse know that you've got the most options and the stretch IRA is a great way to go number two
Let's assume you're a non spouse beneficiary may be a parent passed away in left to an IRA well
You've got to be aware of a couple important rules if you want to do the stretch IRA and you still can
But you can't roll it into one of your pre-established IRAs
And and there's some specific verbiage that needs to be used for through this process you want to talk to the IRA
custodian or broker dealer that you're going to be using for your IRA you have to open a new IRA account and
Roll that IRA or transferred into a new IRA, and you can't do a 60-day rollover, and it's got to be an account
That's established with the name. That's an inherited. IRA so make sure you understand those rulz, but the second piece of this
That's most important is that you have to start required minimum distributions or RMDs immediately now
It's based on your life expectancy so you have to look at it if I'm 40 years old
I might have a life expense expectancy in another 30 years
And so you would then spread out that I erase distributions over your life expectancies not your parents
so you want to run the numbers and find out what that table says based on your life and life expectancy and
Start RMDs. Immediately if you don't start them by December 31st in the year your parent passed away
There's a up to a 50% penalty so you got to get started on that
Immediately if some of you haven't done that yet get going and talk to your accountant right away to start those RMDs
But the beauty is you don't have to distribute it within five years or take it out all at once you can spread it out
over time
Number three let's talk about the Roth factor now
We love Roth IRAs because you don't pay tax on the distribution
And there's no penalty to pull out money out of an inherited Roth IRA because you inherited it
There's no penalty so lots of options now first for spouses
Again sky's the limit you can take that
Inherited Roth IRA from your spouse and put it in your own Roth
IRA and just wait to take distributions anytime you want until you're required to at age 70 and a half however if you're a
Non spouse beneficiary then you've got to start your RMDs right away just as if it was a traditional IRA but again
There's no tax or penalty you could pull out all the money faster if you want
It's up to you
But you've got at least take out a minimum amount based again on your life expectancy and look at the tables for those are MDS
For that Roth IRA now. There's one last important point
I want to make number four and that is again, but you can self-direct your IRAs
I'd say again because I talk about this all the time and many people don't realize how powerful an inherited IRA can be
Especially an inherited Roth IRA because you can take that inherited IRA as a spouse or a non spouse beneficiary get it set up
But then you can invest it you can invest it in what you know best
invest in real estate racehorses a restaurant a business of notes
Whatever it doesn't have to be stocks bonds and mutual funds
remember you're driving a vehicle and what you put in the back seat is up to you so the
Beneficiary Roth IRA is just amazing because you can invest it create more wealth
Tax-free and pull it out tax-free as long as you're meeting those required minimum distributions if you're a non spouse beneficiary
But for the spousal beneficiary ohmygosh start investing that Roth IRA in anything you make tax-free in summary
I know
This is probably a sensitive topic if you are reading about a stretch IRA because someone's passed away
And you've inherited it so I apologize for my excitement talking about the potential of what to do with this IRA
But I love saving taxes
I love building wealth and protecting it these IRAs can be amazing so maybe I'm a glass full kind of guy so
My condolences to the passing of that loved one
But let's take this IRA and use it let's stretch it
Invest it and invest it in what you know best now if this all sounds
New and amazing to you
Please check out the information below and listen here in a minute as to how you can better get involved with our firm law firm
Or accounting firm to help you better. Live your American dream
Thanks for watching, and if you love that video. I've got a lot more
Please subscribe to my channel and I shoot weekly videos that can help you in your business personal life and better
Live your American dream also check out my newsletter free newsletter every week with blog articles tips strategies tax deadlines
You'd love it. Also if you like social media
Please follow me on social media with some daily tips
And if you like to connect that way it can be a lot of fun
But finally please check out my tax and legal library I have
50-plus videos on these topics and more where I pull out a whiteboard and breaking down hours and hours of helpful information
That can better help you live in America
You