Inherited IRAs can be a helpful financial asset for your loved ones. But without careful planning, they can create confusion, unexpected taxes, or even penalties. If you own an IRA or expect to inherit one, understanding how the rules work can help you protect your financial future.
At Kulas Crawford & Smith, we guide Florida families through the process of including retirement accounts in their long-term Estate Planning strategies. We’ll help you make decisions that support your family and align with your financial goals.
For a helpful breakdown of options, The SECURE Act and What It Means for IRA Beneficiaries in Florida covers recent legal changes and timelines.
What Happens to an IRA After Death?
An Individual Retirement Account (IRA) doesn’t pass through probate like other assets. Instead, it goes directly to the beneficiary named on the account. But how that beneficiary can access and use the funds depends on their relationship to the original account owner and other key factors.
Under the federal SECURE Act of 2019, most non-spouse beneficiaries must withdraw the full balance of an inherited IRA within 10 years. This rule changed how many families plan for retirement assets.
Spouses, minor children, and certain other individuals may qualify for exceptions. You can review the IRS’s Required Minimum Distributions (RMD) guidelines for more details.
Why IRA Inheritance Planning Matters
IRAs can be a significant part of your legacy. Without a plan, your loved ones might face:
- Large, unexpected tax bills
- Loss of eligibility for public benefits
- Missed investment opportunities
- Confusion about when and how to withdraw funds
Florida families often use IRA planning to:
- Reduce tax impact
- Protect inherited funds from creditors
- Coordinate with trusts or other estate tools
- Support children or grandchildren
- Provide for a surviving spouse
Who Can Inherit an IRA?
Anyone you name as a beneficiary can inherit your IRA. Common choices include:
- Spouses
- Children or grandchildren
- Siblings or other relatives
- Charities or nonprofit organizations
- A trust
Spouses have the most flexibility under IRS rules. They may roll the IRA into their own account or treat it as an inherited IRA. Non-spouse beneficiaries must usually withdraw the full balance within 10 years.
See Investopedia’s definition of an inherited IRA to learn more about how these accounts work.
Want to align your IRA with your estate goals?
Call (772) 398-0720 or contact Kulas Crawford & Smith to get support from a legal team that understands Florida inheritance rules.
IRA Planning With Trusts
Some people name a trust as the beneficiary of their IRA. This option can offer more control over how and when funds are distributed.
For example, you might want to:
- Protect a minor child’s inheritance
- Limit annual withdrawals
- Prevent a beneficiary from spending the entire amount at once
- Safeguard assets from creditors or divorce
However, not all trusts are treated equally under IRS rules. If the trust doesn’t meet specific requirements, the 10-year withdrawal rule may apply, or tax burdens may increase.
We help you decide when a trust makes sense and draft documents that meet legal standards.
Tax Considerations for Inherited IRAs
IRA distributions are usually taxed as ordinary income, unless the account is a Roth IRA. Roth IRAs grow tax-free, and qualified distributions are also tax-free. Traditional IRAs, on the other hand, are funded with pre-tax dollars, and withdrawals are taxed when received.
Distributions from inherited IRAs can push your heirs into a higher tax bracket. Planning ahead helps minimize this risk. For example, you might:
- Convert a traditional IRA to a Roth during your lifetime
- Time distributions across low-income years
- Leave IRA assets to lower-earning beneficiaries
Visit Investopedia’s Roth IRA conversion article to explore how this process works.
Unsure how to structure your IRA plan?
Should You Name a Trust as Your IRA Beneficiary? Pros and Cons for Florida Families explores options and decision points.
Blending IRA Planning With Estate Planning
Your IRA is part of your full financial picture. To avoid unintended consequences, your Estate Planning documents should reflect your retirement account choices.
We’ll help you:
- Review and update beneficiary designations
- Make sure your will or trust coordinates with your IRA
- Avoid naming outdated or deceased beneficiaries
- Plan for income taxes and long-term growth
- Prepare heirs for inherited responsibilities
Our team can also coordinate with your financial advisor or CPA to make sure all parts of your plan work together.
What If You’re Inheriting an IRA?
If you’re a beneficiary of an IRA, don’t rush into taking distributions. Start by confirming:
- The type of IRA (Traditional or Roth)
- Your relationship to the account owner
- Whether you’re subject to the 10-year rule
- Any options for delaying or stretching withdrawals
- How the inheritance may affect your taxes
We can walk you through your options and help avoid costly mistakes.
Recently inherited an IRA?
5 Things to Do First If You’ve Inherited an IRA in Florida outlines your next steps and timelines.
How Kulas Crawford & Smith Can Help
At Kulas Crawford & Smith, we support Florida residents who want to make the most of their IRAs — whether they’re planning for the future or dealing with an inheritance now.
We can help you:
- Draft or review beneficiary designations
- Decide if a trust should receive IRA assets
- Coordinate IRAs with wills and trusts
- Minimize taxes and protect beneficiaries
- Understand the SECURE Act and how it affects your plan
Whether you have one retirement account or several, we can help you protect what you’ve saved.
Take Control of Your IRA Legacy Today
Your IRA can be a powerful part of your legacy, but it requires careful planning. Call (772) 398-0720, contact us online, or visit Kulas Crawford & Smith to schedule a consultation and protect your retirement savings for the next generation.
Helping Florida Families Build Strong Legacies
Kulas Crawford & Smith proudly serves individuals and families in Port St. Lucie, Vero Beach, and throughout the Treasure Coast. We’re here to help you plan, protect, and pass on your values with care and clarity.