Part of the fun watching TV game shows is imagining yourself winning the prizes. What you don’t think about is that they typically come with strings attached.
For example, winners often have to pay taxes on the money won, shipping costs on the dining set and a higher insurance premium on the new sports car. They may also have a hard time figuring out where they’re even going to put all this stuff. In a way, winning becomes a burden. As an IRA beneficiary, it’s easy to feel the same way when you realize all the rules that come with an inheritance.
In most cases, wealth isn’t passed on by a rich relative in cash but rather by a parent or spouse in the form of an inherited retirement account, such as an individual retirement account (IRA) or 401(k).
An inheritance can provide a boost to your finance life. It can help you pay off debt or bolster your retirement savings. When it comes to an inherited retirement account, however, there are many options to consider before you take ownership and use the money. And, the rules change depending on your relationship to the account holder and the type of account you inherit.