Investors & landlords

First let's address what your options are for the inherited IRA.

If you inherit a traditional IRA, you are called a beneficiary. A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive.

Inherited from someone other than spouse. 

1. If you inherit a traditional IRA from anyone other than your deceased spouse, you can't treat the inherited IRA as your own. This means that you can't make any contributions to the IRA. It also means you can't roll over any amounts into or out of the inherited IRA.
2. However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary.
3. Like the original owner, you generally won't owe tax on the assets in the IRA until you receive distributions from it. You must begin receiving distributions from the IRA under the rules for distributions that apply to beneficiaries.

Distribution Requirements:

• Required Minimum Distributions (RMDs) are mandatory and distributions must begin no later than 12/31 of the year following the year of death. Distributions are spread over the beneficiary's single life expectancy.

For an inherited IRA received from a decedent who passed away after December 31, 2019:

Generally, a designated beneficiary is required to liquidate the account by the end of the 10th year following the year of death of the IRA owner (this is known as the 10-year rule). During the 10-year period, the beneficiary may take distributions of any amount at any frequency.

• There are exceptions for certain eligible designated beneficiaries, defined by the IRS, as someone who is disabled.
  • IRS Definition of Disabled:  A person is permanently and totally disabled if both of the following apply.

    • He or she can't engage in any substantial gainful activity because of a physical or mental condition.

    • A physician determines that the disability has lasted or can be expected to last continuously for at least a year or can lead to death.

This is some of the initial information about what you can do with your inherited IRA.  Any distribution will be taxable, but you must decide when to take it.  

These are important decisions you face and a local attorney who specializes in estates should be contacted for advice so that you are educated on the best choices overall for your property, your IRA and whether you should spend the money on the vacation rental at this time.

And then you can contact us for "Live Tax Advice for your 2021 tax return.