Inherited Traditional IRAs

When coordinating retirement savings with estate planning, there are special rules regarding IRAs and estate taxes.

After you are gone, the beneficiaries of your traditional IRA must generally include in their gross income any distributions they receive. Your "beneficiaries" can include your estate, your spouse, your dependents, and anyone you choose to receive the benefits of your IRA after you die.

If your spouse inherits your traditional IRA, the spouse can elect to treat the entire interest in the IRA as their own (i.e., make a tax-free rollover). If your traditional IRA is inherited by someone other than your spouse, they cannot treat it as their own IRA. They cannot roll over any part of it (including rollovers to a Roth IRA) or roll any amount over into it, and they cannot make any contributions to the inherited traditional IRA.