can an inherited ira be split between siblings

We explain everything you need to know in this guide about inheriting an IRA and dividing it between siblings.

After a parent passes away, siblings frequently inherit possessions from their late parents. These assets may consist of anything, such as IRA accounts, bank accounts, houses, jewelry, or automobiles. It will be essential to comprehend the procedure for deciding what to do next when you inherit assets. Due to the possibility that your parents intended for you to share an equal portion of the inheritance, you can frequently inherit assets in a joint manner with your siblings. Understanding the legalities can become even more complex when things are inherited jointly.

Inherited IRA accounts are one asset in particular that can be difficult to understand. This is due to the fact that it can be difficult to understand the precise regulations governing how to manage inherited IRAs. Leading provider of online estate planning services, Trust and Will, is aware of how confusing this can be. For this reason, we have created this post to help you better understand all of the regulations pertaining to inheriting an IRA account and how to divide it among your siblings. To find out more about the nuances of inheritance and division amongst siblings, continue reading below!

My response to your message was blocked for potentially violating safety policies. I apologize for any inconvenience.

Rules for Splitting IRAs

The SECURE Act* permits those who are disabled, minor children, chronically ill, not more than ten years younger than the deceased, or a spouse to ignore the death year requirements and instead adhere to the more favored inherited IRA rules that are applicable to those who died prior to 2019. The RMD was determined by taking into account the account holder’s life expectancy for those who passed away in 2019 or earlier. As a result, the amount in the IRA account will be split by the number of years you are predicted to live, based on the account’s date of inheritance.

But there are a few conditions you should be aware of because you and your siblings will receive multiple benefits. In cases where there are multiple beneficiaries, the minimum required distribution amount will be ascertained by utilizing the oldest beneficiary. The oldest sibling’s age will therefore decide it.

For people who have been designated as joint beneficiaries of an IRA account, there is one option. The IRA may be divided between the two of you into distinct inherited IRAs. Within a year of the deceased’s passing, this needs to be completed. By doing this, you will enable yourself and your siblings to each have a distinct inherited IRA, enabling you to calculate your minimum required distributions based on your individual life expectancies.

It will be crucial that you and your siblings get down and decide what is best for the three of you as a group. To avoid causing misunderstandings or resentment, you should also make sure that everyone is in agreement and knows how the inherited IRA will be divided moving forward.

Adult siblings can divide the IRA among several inherited IRA accounts that each own separately, or they can transfer the IRA into an inherited IRA using a single account they own jointly. By December 31st of the year the IRA was inherited, the transfer must take place. The siblings have ten years from the time the account is transferred to withdraw all funds from the inherited IRA and pay taxes on them.

The siblings may take the assets and use them if they so choose. They must, however, pay regular income taxes on the assets, which may amount to a sizable amount. The sibling’s annual income determines the tax rate.

A financial planner or accountant’s expertise is necessary when splitting an IRA between siblings in order to make wise decisions that will preserve the assets and reduce taxes.

The first thing to consider when siblings inherit an IRA is if they qualify as “eligible designated beneficiaries.” An individual designated in an account to receive funds upon the owner’s passing is known as a beneficiary. The beneficiary then inherits the account directly. Beginning in 2020, a few categories are considered “eligible designated beneficiaries” under the SECURE Act. This covers the partner, any minor children, people with disabilities or long-term illnesses, and anybody who is no younger than ten years old when it comes to the account owner. Over-18-year-old adult children are not eligible to be designated beneficiaries.

Minor children inheriting an IRA have another option. Depending on their life expectancy and the account’s value, their parent or guardian may convert the IRA into an inherited IRA and take required minimum distributions. Starting on December 31, the year they inherited the IRA, the distribution must be made. The money is taxed as income. The ten-year rule takes effect when the minor child reaches legal age. When they reach legal age, they have ten years to withdraw all of the funds from the account.

Dividing an Inherited IRA Between Two Beneficiaries


How do I distribute an inherited IRA to multiple beneficiaries?

If multiple beneficiaries, separate accounts must be established by 12/31 of the year following the year of death; otherwise, distributions will be based on the oldest beneficiary. RMDs are mandatory and you are taxed on each distribution.

Can you split an IRA into two accounts?

By splitting the IRA into separate accounts, you can better control what would happen if each beneficiary disclaims his/her share. For instance, your beneficiaries might be your two children, with your grandchildren named as contingent beneficiaries.

Can you transfer an inherited IRA to a family member?

In the case of siblings, if you have inherited a parent’s IRA, you have several options. Most notably, you can either withdraw the full value upfront or transfer the account into what is called an “inherited IRA.” And how you share this money is at your discretion.

What are the rules for an inherited inherited IRA?

The 10-year rule requires that all assets in the inherited IRA must be fully withdrawn by the end of the 10th year following the original IRA owner’s death. (If the death occurred in 2019 or earlier, the 10-year rule was a five-year rule.)

Can I split an IRA if my sibling dies?

Thus, it will be determined by the age of the oldest sibling. There is one alternative for those who have become joint beneficiaries of an IRA account. You can split the IRA between the two of you into separated inherited IRAs. This must be done within a year of the deceased passing away.

What happens if a sibling inherits an IRA?

When adult siblings, meaning that they are over their local age of majority, inherit an IRA, they have two options. The siblings transfer the IRA into an inherited IRA. They can either use a single account that they jointly own. Or they can distribute the IRA among multiple inherited IRA accounts that each sibling owns individually.

Should you split an IRA into multiple inherited IRA accounts?

The 10-year rule is one reason why it’s advantageous to split an IRA into multiple, individual inherited IRA accounts. This rule applies as soon as any beneficiary reaches the age of majority, meaning it is based on the age of the oldest child. Splitting an inherited IRA between siblings is a technical process that involves taxes.

Can siblings transfer an IRA into an inherited IRA?

The siblings transfer the IRA into an inherited IRA. They can either use a single account that they jointly own. Or they can distribute the IRA among multiple inherited IRA accounts that each sibling owns individually. This rollover must occur by Dec. 31 of the year in which the IRA was inherited.

Leave a Comment