What are the tax implications of inheriting an IRA, stock and mutual funds (inheritance tax, income tax, and so on)?
To your first question: when your father passes away, your mother will have three options for his IRA. The first option is for your mother to roll over your father’s IRA into her IRA, either an existing IRA or a new one. The advantage is that the “Required Minimum Withdrawals” will be based on your mother’s age. If she chooses, she can “stretch” the distribution of her IRA over two lifetimes by naming a beneficiary who is at least 10 years younger than her. The second option is to transfer your father’s IRA into an “Inherited IRA Beneficiary Distribution Account.” The timing of the Required Minimum Withdrawals will depend on whether your father will be over or under age 70 1/2 at the time of his death. If he is under 70 1/2, your mother can delay the distributions until she turns 70 1/2. The third option is for your mother to disclaim, i.e. refuse, the inherited IRA so it will pass to the next beneficiary. Whoever is the ultimate beneficiary will pay ordinary income taxes on all pretax
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