Posted by Judith Sanborn, CFP®, AIF®
What you should know in order to benefit the most from this type of inheritance.
An inherited individual retirement account or IRA, lies at the tricky 3-way intersection of estate planning, financial planning and tax planning. One wrong decision can lead to expensive consequences. The first thing to do if you are a beneficiary of an IRA is to meet with a financial adviser who can explain your options. The worst thing you can do is to cash out the plan. Distributions from an inherited traditional IRA are 100% taxable as ordinary income. Distributions from inherited Roth IRAs are not taxable.