Inherited IRAs: What are my options?

Losing someone is tough. Typically, money transfers of inherited accounts are one of the last things people think about when losing a family member or significant other. It certainly takes time to relive the memories and cherish and honor their lives. We find most people end up transferring money after six months go by, which can be a significant amount of time value in financial markets.

That said when it is time to transfer an inherited IRA, here are some common options for you or your family member to consider:

1.) Initiate a rollover to a beneficiary IRA

Do you have a financial advisor that you are pleased with? Consider opening an inherited IRA at your current financial institution. Your current advisor or retirement plan provider should have experience in transferring inherited IRAs and can help guide you through the process. If it were your spouse, you’d most likely want to roll over to your current IRA.

2.) Open a new IRA

Did you inherit a significant amount of money? Not sure how to invest it or whether you should keep the securities? This is when the help of an experienced financial advisor comes in. Depending on your age and investment experience, a financial advisor will provide different investment strategies and risk tolerance levels. Typically, the younger you are, the more aggressive a financial advisor will be in placing your investments in stocks. The older you are, risk tends to dial down. Keep in mind that different advisors have different styles and investment minimums it’s up to you to hire a good fit. Also, CPAs and attorneys are always great to ask because they typically work with many financial advisors, especially around tax time.

3.) Keep the securities

Was your family member a good investor? What have their investments looked like over time? Did they have a knack for picking stocks? If you think that might be the case, it could be better to hold on to some securities rather than sell them and convert to cash. It depends on analyzing the investments, your investment horizon, and risk tolerance, which is something that a financial advisor can help you discover.

4.) Invest smart

Consider that your family member left you money, and perhaps one day you can help pass it along by helping the nest egg grow into something more significant. If you invest smart and don’t have too much exposure in any sector or type of security, then you’ll likely have a better chance of passing the money forward in your family.

5.) Name beneficiaries

Life is fragile, and anything can happen to us at any time. That is why it’s so important to name beneficiaries on all of your investment and banking accounts. If you think you don’t have them, then make that a priority this week. If you don’t have a will or named beneficiaries, it’s an extremely cumbersome task to pinpoint post mortem. Don’t do this to your family members.











So, are you ready to transfer your inherited IRA?

Here is what happens typically:

  1. You’ll usually need to open a beneficiary IRA at the financial institution where your family member named you as the beneficiary
  2. Once that account is open, you sign an asset authorization form to acknowledge you permit the transfer to the beneficiary IRA
  3. Once approved, assets will transfer in kind or in cash, whichever you specify
  4. From there, if you want to move the money to another financial institution, you’ll need to speak with a representative at the receiving institution to initiate the request.
  5. Decide how long you’ll hold in-kind securities or deploy a new investment strategy.

Have more questions about inherited IRAs? Contact us at McClure Wealth where we have more than 25 years experience in managing inherited IRAs, business 401ks, retirement plans, IRAs, and investment accounts. We are located in sunny Carlsbad, California, and can be reached every day during market hours.

Please consult your tax professional for tax advice regarding a beneficiary or inherited IRA to understand the tax rules/consequences with these kinds of IRAs. There are no guarantees that investment strategies will be successful. Investing involves risks, including possible loss of principal. Diversification does not ensure a profit or prevent losses.

Thank you for reading!