Does a beneficiary have absolute control over the form of an inherited IRA?
A spouse-beneficiary can, of course, change the title to the account and treat it as his own without any immediate tax consequences. A non-spouse beneficiary can also change accounts and investments within accounts. But there’s a big caution here: Make sure you don’t change the title of the account to your own name. You must keep the account in the name of the deceased owner. Trap: Changing the title of the account to your own name amounts to a distribution, which can trigger immediate tax. Who is the person responsible for paying estate tax on an inherited IRA? Even though the IRA you inherit passes outside of the owner’s will, it is included in his taxable estate. This applies to both traditional and Roth IRAs. Is an inherited IRA subject to income tax? Yes. In addition to estate taxes, you are liable for income taxes on the IRA you inherit. Traditional IRAs are fully taxable – not when you receive the inheritance but when you take distributions from the account. If you inherit a Rot
