An inherited IRA is an individual retirement account that is opened when someone inherits an IRA or employer-sponsored retirement account after the original owner dies. The beneficiary of the account may be anyone, including a spouse, relative, unrelated party, or entity such as an estate or trust. Here are some key points to keep in mind about inherited IRAs:

• Beneficiary classification: The available options for the inheritor depend on their beneficiary classification. Spouses have their own set of rules, while non-spouse beneficiaries have a different set of rules.

• Transfer of assets: Typically, assets held in the deceased individual’s IRA must be transferred into a new inherited IRA in the beneficiary’s name, even if a lump-sum distribution is planned.

• Tax implications: Tax laws surrounding inherited IRAs are quite complicated, and withdrawals from a traditional IRA generally are taxable as income, at the beneficiarys income tax rate.

• Continued growth: If the beneficiary opens an inherited IRA instead of taking a lump-sum distribution, they can continue to take advantage of potential growth in a tax-advantaged account.

• Distributions: Certain rules determine when the beneficiary must begin taking distributions and/or when all of the assets must be distributed from the account. These rules are based on the beneficiary classification and relationship to the original account holder.

Its important to note that inherited IRAs present many complications, and its recommended to consult a tax advisor for more details.