Grandpa died and left me an IRA. Now what?

First, thank your lucky stars for a generous grandpa who spent less than he saved. An inherited IRA can be a real financial boost, but it also comes with rules.

Start With This Assumption

Let us assume this is a Traditional IRA, not a Roth IRA. Roth accounts follow different rules.

Can You Just Leave It Alone?

Probably not. In general, the government wants taxes paid on Traditional IRA money eventually, so inherited accounts cannot simply sit there forever.

Under the rules described in the original article, you are required to empty the account within 10 years of the year of death. If Grandpa died in 2024, for example, the account would need to be emptied by December 31, 2034.

If he had already reached the age when required minimum distributions applied, there may also be annual withdrawal requirements along the way.

This is one of those situations where "do nothing" can get expensive fast.

How To Handle The Required Minimum Distribution

The RMD amount can change year to year based on:

• the IRA balance as of December 31 of the prior year
• your life expectancy under the applicable rules

The easiest move is to ask the bank or brokerage firm to calculate it for you. Missing an RMD can trigger a steep penalty.

Common Withdrawal Approaches

1. Take it all at once

This creates one large tax event. It may make sense if you are in an unusually low-income year and expect higher income later.

2. Spread withdrawals across 10 years

This can smooth the tax impact and make planning easier. You still need to be sure you satisfy any annual minimum distribution rules that apply.

3. Take minimums, then drain the rest in year 10

This delays more of the tax bill, which may appeal if you expect to be in a lower tax bracket later. The tradeoff is that year 10 could come with a large tax hit.

Can You Roll It Into Your Own IRA?

Because inherited IRAs have their own tax rules, it is generally best to keep the inherited account separate. If you want this money to support your own retirement later, one possible strategy is to withdraw funds over time, pay any taxes due, and then contribute some of that money to your own retirement accounts as allowed.

Your Next Steps

1. Confirm whether the inherited IRA is Traditional or Roth.
2. Ask the financial institution to calculate any required distribution.
3. Set a yearly reminder so you do not miss deadlines.
4. Think through the tax impact before choosing a withdrawal schedule.

Read the original article.