Can You Convert an Inherited IRA?

If you inherit an IRA, there are ways to reduce taxes. If you are the spouse or chronically ill/disabled account holder, distributions can be “stretched out over your lifetime”.

Non-spouse beneficiaries must abide by different rules than spouse beneficiaries, with the 2019 SECURE Act further altering inherited IRA regulations.


As inheriting an IRA can be complex, it is best to consult a financial advisor prior to making decisions about it. First off, determine whether the original account holder had begun taking required minimum distributions (RMDs) by their time of death; if not, treat the IRA like your own and withdraw funds whenever convenient; otherwise you must adhere to an RMD schedule based on your life expectancy in order to empty it by the 10th year after inheriting.

Non-spouse beneficiaries have two options for disbursing an inheritance: cashing out immediately and paying taxes, or making withdrawals over 10 years to reduce taxes as long as possible. In order to do this, however, they must be eligible designated beneficiaries such as: (surviving spouse or minor children of the original account owner; disabled or chronically ill heirs or those less than 10 years younger than original owner. For all other beneficiaries however, the 10-year rule applies).


Dependent upon their circumstances, beneficiaries of an inherited IRA have several options for how to handle it. A spouse inheriting an IRA typically treats it like their own; their funds continue to be taxed as they would have been had they opened it themselves. Non-spouse beneficiaries face more complicated options and should seek advice from both an expert in retirement planning and tax law regarding how best to proceed with them.

Non-spouse inheritors must generally empty their inherited accounts within 10 years and withdrawals may be income taxed; however, there may be strategies available to lessen this tax burden. Some inheritors may wish to convert to Roth in order to reduce future taxes; otherwise disclaiming inheritance and passing it along can always be done within nine months after an account owner dies and another eligible beneficiary takes over their inheritance.


Before the SECURE Act changed distribution rules for nonspouse beneficiaries, IRA owners could extend payments by designating young children or grandchildren as primary beneficiaries for an inherited IRA account. Unfortunately, that option no longer exists unless one qualifies as an exception to the new rule.

Spouse beneficiaries have one advantage that nonspouse beneficiaries don’t: Rolling inherited assets into an individual retirement account and treating them as your own. This strategy can make sense if you need access to your spouse’s assets for living expenses but want to spread withdrawals out over your lifetime and minimize taxes.

Inherited IRAs may include both pre-tax and after-tax assets. When creating your plan for an inherited IRA, consult a reliable tax professional to maximize its benefits. For additional information on inherited IRAs (SECURE Act compliant), view our Inherited IRA Brochure or review the new rules with our Inherited IRA Rules Chart.

Roth IRAs

Decidng whether or not to convert an inherited IRA depends on your unique situation and options available to you. While the IRS provides comprehensive rules regarding distributions from IRAs, for specific advice on your particular circumstance it would be advisable to speak to a fiduciary financial professional about how best to distribute them based on type and relationship of account owner; spouses can transfer ownership through spousal transfer while non-spouses have more complex options available to them.

Before taking any distributions from an inherited IRA account, it’s important to determine whether it must distribute funds each year based on its original owner’s life expectancy or whether you must empty it within 10 years. Furthermore, consider whether any after-tax contributions can be claimed which can help lower your taxes significantly and also determine if their original account holder took RMDs and how much.

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