Inheriting An Investment Account
Inheriting an investment account can be a complex process. What exactly you need to do will depend on the type of investment account you are inheriting. In this article, we will go over the basics of what is involved in inheriting an investment account.
Joint Investment Account
A joint investment account is the easiest type of investment account to inherit. To place this type of account solely into your name, you will need to provide your custodian with a death certificate. Once that is provided the custodian will be able to transfer the account solely into your name.
Non-retirement accounts can include such accounts as a mutual fund or a brokerage account. To inherit this account, you will need to be a beneficiary of the account or provide probate documentation to show your right to the account. Once the custodian accepts you as a beneficiary you will be able to transfer funds into a new account in your name. There will be no required distributions for tax purposes.
Individual Retirement Account
How you can inherit an IRA will depend on whether you are a spouse or a non-spouse beneficiary.
As a spouse, inheriting an IRA is simple and avoids a large tax bill. You have two options for how you would like to place the account in your name. The first option is to transfer the account into an IRA in your name. Doing so will allow you to make contributions or withdrawals according to the same rules that would apply to accounts you opened yourself. This means you can take penalty-free withdrawals at 59 ½ and must take RMDs at 72. However, to transfer the account this way you must be the sole beneficiary on the account.
The second option for transferring the account is to place it into an inherited IRA. With this type of account, you will not be able to make contributions and the IRS will require you to take full distributions within the tenth year of the year following the death of your spouse.
If you are a non-spouse beneficiary your only option for inheriting an IRA is utilizing an Inherited IRA account, you must fully distribute the account by the tenth year of the year following the death of the IRA owner. If the account is liquidated within this time frame you can make the distributions of any amount at any frequency.
Completing Your Inheritance
If you are having trouble or need help inheriting an investment account, our firm can help. Our investment management and tax planning expertise can help you make the most of your new account.
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