By Stuart Canzer, Founder of Peachtree Financial
No one asks for a gift
Losing a loved one is hard. Inheriting an IRA can feel like a blessing and a responsibility at the same time – and maybe a pinch the moment you realize it comes with tax implications and rules galore. When you’re sorting through letters, memories and new tasks, it’s easy to feel lost – or even lonely.
But you are not. The process can be complicated, but it’s also a way to keep your loved one’s legacy alive. As the iconic song Simple Mind asks, “Don’t you forget about me?” – Treating this legacy thoughtfully is one way to remember.
What is an Inherited IRA?
An Inherited IRA is any Individual Retirement Account passed to a beneficiary after the original owner died, whether from a parent, spouse, or friend. There are three types: spousal inherited IRAs, non-spouse inherited IRAs, and inherited through trusts or estates. Each one comes with its own rules and regulations, which can feel overwhelming – like trying to recognize a familiar song in new situations.
Before anything else, stop. “Do you want me?” the lyric resonates, and in this place about your knowledge of the unique relationship between the reason and the person who left you.
Clarify your relationship to the deceased
If you are the surviving spouse, you have the most flexibility. You can roll over your IRA account, treat it as your own, and delay Required Minimum Distributions (RMDs) until age 73. That means tax-deferred growth over many years.
If the heir is not a spouse under the Safeguard Act (2019), the account must be liquidated at most within 10 years of the original owner’s death – a rule often referred to as the “10‑year rule”. No annual withdrawals are required — unless the original owner had already taken RMDs — but come year ten, the account must be fully distributed.
It’s a lot to take in. But as the song reminds us, “Will you not look around me?”. – it’s not just like this. Ask for help if needed.
Other exceptions exist for designated eligible beneficiaries – those who qualify as surviving spouses, minor children (under 21), disabled or chronically ill or someone no more than 10 years younger than the original owner. These beneficiaries can follow the life expectancy plan for the rule of 10 years, but only until at least the date of death.
Ask yourself: What’s your shoe?
An inherited IRA isn’t just random money—it can be a powerful tool if used thoughtfully. Maybe you want to increase the deferral by taking small withdrawals each year. Or maybe they need cash now and don’t mind paying a bunch of taxes.
This also applies to the hymn: “Will you call my name as you walk?” – What do you call this gift in your life? Security? Relief? A new beginning?
Know your goal—whether it’s growing your retirement savings or paying off debt—guides your plan and timing.
Tax Bite: What you owe (And how to relax)
Traditional IRAs are taxed as ordinary income. Roth IRAs are generally tax-free – if they meet the five-year requirement. To pay tribute, consider;
- Distributions spread over several years to avoid income spikes
- Schedule withdrawals in low-income years
- Making individual Roth conversions is now taxed at lower rates
Remember, it’s not just about managing numbers, but someone’s legacy – “You’re not trying to imagine…” that’s just about math. Using what you have received wisely only honors the person who left it to you.
Basic Required Minimum Distributions (RMDs).
Spouse’s heirs generally defer RMDs until age 73. Non-spouse heirs follow the 10-year rule, with no annual RMDs – unless already initiated by the original owner or an exception applies. Missing deadlines can incur steep IRS penalties – up to 25% of missed distributions.
This is one more reminder that, with inherited IRAs, “slow change can tear us apart” — but smart planning preserves your options — and your loved one’s wishes at the same time.
Other considerations & smart tax moves
IRAs open strategic opportunities;
- Qualified charitable distributions (QCDs): If you’re age 70½+, direct transfers to charity — up to $108,000 in 2025 — are taxable and count toward RMDs.
- Review and loan fees: Some inheritance accounts have limited options or high fees – shop around for better savings and investments.
- Growing Roth IRAs: Inherited Roths, which can be held for up to 5 years, can grow tax-free for up to 10 years or less as the schedule allows.
The importance of a proactive plan
The worst mistake? You do nothing. Even if you don’t want to use the money imminently, the IRS will stop – and it’s optional. Work with a financial advisor to create a plan, account for taxes, RMDs, and your long-term goals. At Peachtree Financial, we believe that heirloom IRAs are both a financial asset and a living cash legacy.
IRA Inheritance can come with associated nerves – but it also comes with opportunity. It can support your family, fund major goals, or fuel retirement planning — if you put in the thought.
Not a game. To ask Based on the test plan.
And when you wonder how to honor what has been given you, remember that every choice of the wise answers what the untimely calls;
“Don’t forget about me…”
Because the way you think today becomes a legacy tomorrow.
