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

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.

Why set up an Inherited Traditional IRA if thebeneficiary can take a lump-sum withdrawalwithout the 10 percent premature distributionpenalty?

• The beneficiary may not want to pay income• The beneficiary may not want to pay incometaxes on all of the proceeds in just one year. AnInherited Traditional IRA allows a beneficiary tokeep the money growing tax-deferred whilemaintaining the ability to receive withdrawalswithout the 10 percent premature distributionpenalty.

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 InheritedThe 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.

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 distributionto 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.

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?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.

Remember: Indirect "60-day"

rollovers are not allowed for

Inherited IRAs. The money

must be moved by a directmust be moved by a direct

transfer or direct rollover.

Inherited IRAs with Modern Woodmen

“You will be required to take a distribution every year based on your life expectancy.”

Note: In the event the beneficiary is older than the deceased and the deceased died on or after April 1 of the year after attaining age

Note: Inherited Roth IRAs may

qualify for income tax-free

distributions.

“The balance that stays inside the

Inherited IRA will continue to

grow tax-deferred.”

“You have the ability to receive of the year after attaining age 701⁄2, the life expectancy payments will be based on the age of the deceased. This will be rare.

“The required withdrawal amount will be subject to ordinary income taxes but not the 10 percent penalty for premature distributions received before age 591⁄2.”

“You have the ability to receive

withdrawals exceeding the

required withdrawal amount.

These withdrawals will also be

subject to ordinary income

taxes but not the 10 percent

penalty for distributions

received before age 591⁄2.”