1. Benefits of setting up an
Inherited IRA
For Bayarea reisidents, Northern
California: Contact Connie Dello Buono,
CA Life Lic 0G60621 408-854-1883
motherhealth@gmail.com
www.modern-woodmen.org

2. Why would a Roth IRA beneficiary want to
establish an Inherited Roth IRA when they
could take a lump-sum withdrawal income
tax-free?
• An Inherited Roth IRA will allow the money to
continue to grow while maintaining the ability
to receive income tax-free withdrawals.

3. Why set up an Inherited Traditional IRA if the
beneficiary can take a lump-sum withdrawal
without the 10 percent premature distribution
penalty?
• The beneficiary may not want to pay income
taxes on all of the proceeds in just one year. An
Inherited Traditional IRA allows a beneficiary to
keep the money growing tax-deferred while
maintaining the ability to receive withdrawals
without the 10 percent premature distribution
penalty.

4. What if the owner of a Roth IRA dies before
satisfying the five tax-year requirement for
income tax-free distributions?
The beneficiary could establish an Inherited
Roth IRA and start receiving their required
minimum distributions. After the five tax-year
requirement has been met, their withdrawals
would then qualify for income tax-free
distributions.

5. Why would a spouse beneficiary set up an
Inherited IRA when they could roll over the
proceeds to their own IRA?
Withdrawals from an Inherited IRA are not subject
to the 10 percent premature distribution
penalty. This may appeal to a spouse beneficiary
who is under age 591⁄2 and is in need of income. If
a surviving spouse is under age 591⁄2 and rolls
over the deceased spouse’s account to their own
IRA, any withdrawal from the IRA will be subject
to the 10 percent premature distribution penalty.

6. If an Inherited IRA would allow a spouse
beneficiary to receive income without a
10 percent penalty, why would the spouse
beneficiary roll over the deceased spouse’s
plan to their own IRA?
The spouse beneficiary does not need the
money and is willing to let the money grow
in the IRA. Their income will be provided by
other sources, such as the proceeds from the
life insurance that was in force at the time
the other spouse passed away.

7. Remember: Indirect "60-day"
rollovers are not allowed for
Inherited IRAs. The money
must be moved by a direct
transfer or direct rollover.

8. Inherited IRAs with Modern Note: Inherited Roth IRAs may
Woodmen
“You will be required to take a qualify for income tax-free
distribution every year based on distributions.
your life expectancy.” “The balance that stays inside the
Note: In the event the beneficiary is Inherited IRA will continue to
older than the deceased and the grow tax-deferred.”
deceased died on or after April 1
of the year after attaining age “You have the ability to receive
701⁄2, the life expectancy withdrawals exceeding the
payments will be based on the required withdrawal amount.
age of the deceased. This will be
rare. These withdrawals will also be
“The required withdrawal amount subject to ordinary income
will be subject to ordinary income taxes but not the 10 percent
taxes but not the 10 percent penalty for distributions
penalty for premature
distributions received before age received before age 591⁄2.”
591⁄2.”