How Should Pennsylvanians Handle Inherited IRAs?

Individual Retirement Accounts (sometimes referred to as Individual Retirement Arrangements) provide a tax-advantaged retirement savings method. Principals may hold a variety of investments in IRAs. Depending on the type of IRA you have, you may either deduct contributions on your income tax returns or avoid paying taxes on distributions. 

There are certain trade-offs for the advantageous tax treatment, though. On top of deduction and contribution limits, certain beneficiaries must empty an inherited IRA within 10 years. Some beneficiaries are able to get a little more creative when they inherit an IRA. 

Spouse Beneficiaries

One of the most common IRA beneficiaries is the principal’s spouse. Fortunately, spouse IRA beneficiaries have more flexibility when dealing with an inherited IRA. Instead of having to start Required Minimum Distributions (RMDs), spouses may roll over the inherited IRA’s funds into their own IRA, take ownership of the IRA, or simply begin taking distributions. The age of the deceased principal and spouse can impact the beneficiary’s decision. 

Spouses are not the only beneficiaries with this flexibility. Minor children and individuals not more than 10 years younger than the deceased principal also do not have to immediately begin taking distributions. Disabled and chronically ill beneficiaries also have more options. 

However, spouses only have 60 days to roll over an inherited IRA. Also, spouses may have to continue receiving RMDs if the original principal had begun receiving distributions. Otherwise, spouses may continue to stretch the inherited IRA over their lifetime.

The SECURE Act Changed Things

Previously, non-spouse beneficiaries could play by the same rules as spouse beneficiaries. The 2019 SECURE Act, however, requires many non-spouse beneficiaries to empty an inherited IRA within 10 years. Even minor children must begin taking RMDs when they reach the age of majority. Some beneficiaries want to take the distribution all at once, but that can result in a significant tax bill. 

Some principals list a trust as the IRA’s beneficiary. This can provide the original principal with some amount of control over the IRA’s assets after his or her death. For instance, a grandparent might worry that a young beneficiary will be irresponsible with the funds. While trusts can be useful for IRA principals, these legal arrangements must meet strict rules. Haphazardly setting up a trust could backfire for the principal and individual the principal wants to receive distributions. 


Saving for retirement is incredibly important. IRAs are useful for this endeavor, but the complex rules can cause trouble for beneficiaries.

This blog only scratches the surface of how to handle inherited IRAs. To ensure you get the most out of your retirement and estate planning while avoiding taxes, you need to speak with an experienced Pennsylvania attorney. HighPoint Law Offices provides advanced planning techniques to our beloved clients. Click here to book a call with our Client Services Director today.

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