ACCOUNT TYPES

Inherited IRA Account

Flexibility is a great benefit of inherited IRAs. Beneficiaries who inherit this type of account may withdraw funds based on their needs, as long as they are in alignment with certain guidelines. They may begin withdrawing immediately or wait until the account matures, all while allowing assets to grow tax-deferred.

Individual Beneficary Kit

Entity Beneficary Kit

An inherited IRA is an Individual Retirement Account for the beneficiary of a deceased owner of an IRA or other types of retirement plans. It allows the beneficiary to withdraw assets based on IRS-approved distribution methods without having to pay an early withdrawal penalty.

While beneficiaries are taking distributions, the account has the potential to continue to grow tax-deferred until all assets have been distributed. Generally, the amount and timing of required distributions are based on the beneficiary's age or the original owner’s age, whichever is longer.

Did you inherit an IRA Account?

If you are the beneficiary of an IRA or qualified retirement plan, depending on its amount and other immediate financial needs, you may want to transfer the deceased individual’s retirement assets into an inherited IRA. A Janus Henderson Retirement Specialist can help you understand your options. Call us from 9 a.m. to 6 p.m. EST on weekdays at 800.525.1093.

Tax Features

What are the tax features?

Qualified distributions from an inherited Roth IRA are not taxed. However, distributions from other types of inherited IRAs are generally taxed at your ordinary income tax rate. Any Required Minimum Distribution (RMD) amounts that are not satisfied for the year may be subject to an excess accumulation penalty of 50%. So make sure to take your RMD!

Once a non-spouse takes a withdrawal due to death, the amount is not eligible for rollover into another IRA. The spouse beneficiary is an exception to this rule and can rollover assets into their own IRA. However, the spouse beneficiary must also take the RMD if required and that amount cannot be rolled over.

Investments

How much can I contribute to the plan?

Beneficiaries typically cannot contribute to an inherited IRA account. If a spouse decides to treat it as their own account by transferring the assets into their own IRA, then they can contribute as long as they meet the standard IRA eligibility requirements.

Generally, the best method for moving inherited IRA assets to another inherited IRA is by transfer of assets. Ask a Janus Henderson Representative for assistance or download the Transfer of Assets Form if you would like to transfer assets to Janus Henderson.

What is the investment minimum?

Are there any important deadlines to be aware of?

Any Required Minimum Distribution (RMD) amounts for the year of death will need to be distributed by the beneficiary. Generally, the beneficiary may have to take annual distributions based on their age.

Forgetting to take the RMD

RMDs have to be satisfied before the end of each year. Any excess accumulations resulting from a missed RMD before the end of the year could result in a 50% penalty. However, if the beneficiary does not take RMDs in the initial years after the owner’s death, they still may be able to avoid the penalty by liquidating the inherited IRA account by the fifth anniversary of the original owner’s death. Keep in mind however, that this could generate a significant tax event depending on the amount of assets in the account. Also, liquidating will also cause you to lose any potential tax-deferred growth in the years ahead.

Help Calculating the RMD

Janus Henderson has the ability to calculate RMDs and assist the beneficiary with establishing systematic withdrawals to help you meet the required IRS rules. Contact a Janus Henderson Retirement Specialist to assist you with understanding the beneficiary distribution options.

Contact Janus Henderson

Fees

What are the fees for an Inherited IRA account?

Withdrawals

How do I request a withdrawal?

Am I required to take money out of the account?

Generally, Required Minimum Distributions (RMDs) from an inherited IRA must be made by December 31 following the year of death of the original owner. However, depending on various circumstances, an RMD can be deferred if the beneficiary is a spouse. Or the payout must be completed by the end of the calendar year containing the fifth anniversary of the owner’s death (known as the 5-year rule).

Generally, this 5-year rule comes into play when the original owner did not name a beneficiary and they were not married at the date of death. In addition, it applies when the beneficiary is an entity, i.e., estate, charity or non-person.

Spouse Beneficiary

An inherited IRA may be an acceptable account type for a spouse that needs the flexibility of withdrawing assets prior to age 59½. Only a spouse beneficiary can treat an inherited IRA as their own for required distribution purposes.
Generally, Required Minimum Distributions (RMDs) must start the year following the year of death of the original owner. However, a spouse beneficiary may wait to take distributions until the original owner would have reached 70½.

Non-Spouse Beneficiary

If you were not planning on receiving an inheritance or don’t need the assets to maintain your living costs, then as a non-spouse, you may want to consider leaving the assets in an inherited IRA while taking required distributions based on an IRS-approved distribution method, which could last over your lifetime as assets grow tax-deferred.
Many financial institutions refer to these accounts as “Stretch IRAs” for beneficiaries.
For help calculating your RMD, please contact a Janus Henderson Retirement Specialist at 800.525.1093.

Helpful Information

What other information might be helpful to know?

Every situation is different. Many factors will determine the next steps. Please contact a Janus Henderson Retirement Specialist or a professional tax advisor about understanding your beneficiary options.

If the distribution payout is not accomplished correctly – such as withdrawing too much, too fast, not enough or too slow – the beneficiary or the estate could experience unpleasant tax consequences. In addition to possible ordinary income tax, a 50% excess accumulation penalty can occur for not taking an annual RMD.

The Janus Henderson Universal IRA Disclosure Statement and Custodial Agreement provides complete details about IRA accounts at Janus Henderson.

For more information, read IRS Publication 590.

I Inherited an IRA. What's next?

With various types of distribution requirements and options, inherited IRAs can be complex. It’s best to speak to a tax advisor about your personal situation. When you need assistance, a Janus Henderson Retirement Specialist can help you calculate your RMD and more.

Contact Janus Henderson

Investment Options

Filter by Asset Class

View

Knowledge Shared

Explore our insights

Blog News Feed

Tax and Estate

Life Events

Retirement Planning

College Saving

Manage Your Investments

Information About

Investing Basics

About Janus Henderson Investors

Our people

Environmental, Social and Governance (ESG)