Have a question about tax implications (if any) on inherited IRAs. My husband recently inherited two traditional IRAs from his mother and step father. Also is the beneficiary of their non retirement investment account.
The IRAs have values around 102,000$ combined in them (one has 92000+ and the other has 11000+) and the investment account has 35000$.
Is there any exemption limit for IRA inheritance tax if we cash out since it is less than 200000$.? We dont have our own IRAs and we dont know much about IRAs to be honest.
We both are self employed and our income is around 55000$ combined plus our profit loss report shows a loss on lot of mileage on our cars so our adjusted gross income is way lower than the gross income. We file taxes jointly. I know we should be consulting a tax advisor , we will be shortly and still I like to get your feedback based on your knowledge and experience on what tax deduction ( if any) roughly we are looking at if we cash out now or in 5 years time and what are our best options here? Thanks!
Btw we live in missouri which doesnt have any inheritance estate tax (dont know if its relevant to IRA related taxes or not)
I can't answer your tax question but I did receive an inherited IRA in 2010. I elected to keep it and just take the required minimum yearly distribution. Even with the yearly RMD the account has increased over 80% in value. If I had "cashed it in", paid taxes and not re-invested; value would probably be 70% of original instead of 180%.
Thanks Thomas for your reply. Yeah we spoke to the investment company and we have decided to keep the money in my husband's inherited IRA account with me as 100% beneficiary and take out RMDs . My husband is 45 so he doesnt need to take a lot next year. My MIL was under 70,1/2 so she was not required to take this year.
This is the most tax efficient way and like you said , the value has the potential to grow.