Receiving an Inheritance?
Determining the RMD from an Inherited IRA (Traditional and ROTH, assuming the ROTH has been open for more than 5 years) involves several factors, including the type of IRA, your relationship to the original account owner, and the age of the account holder at the time of their death.
The 10-year clock starts in the year after the owner dies, essentially giving you 11 years to drain the account. If the account holder was not taking RMDs before passing, the beneficiary isn’t required to take annual RMDs. All the IRS cares about is that there is not a penny left at the end. You can take it all at once, parse it out annually, or take the entire chunk the day before you hit the 10-year deadline.
Now, if the original account owner was taking RMDs from the Traditional IRA, an RMD may be required in years 1-9.
With the Brokerage Account, they receive a “step-up” in cost basis to the value of the assets on the date of the original account owner’s death. When you sell assets in the inherited brokerage account, you may be subject to capital gains taxes on any appreciation that occurred after the date of death. The step-up in cost basis helps reduce the taxable gain.
While we can assist in helping with the tax implications, financial planning decisions are complex and depend on various factors including your overall financial goals, current financial situation, retirement plans, risk tolerance and more. Distributing assets involves more than just minimizing taxes; it requires a holistic approach to financial planning. A financial advisor or CFP can provide a broader perspective, taking into account your entire financial situation, investment goals, and long-term objectives. An investment professional can help design a strategy that considers various factors ensuring a well-rounded approach to asset distribution. We would be happy to recommend someone or speak with your financial advisor/CFP. This interdisciplinary approach ensures that your asset distribution strategy aligns with your broader financial goals and unique circumstances.
The decision to file jointly or separately depends on your specific financial circumstances and goals. There is no one-size-fits-all answer, unfortunately. We would need to meet with you and determine the best course of action.