Inherited IRAs

You can transfer an IRA or employee-sponsored retirement account you inherit from a deceased person into an inherited IRA, rather than taking a lump-sum distribution.

An inherited IRA enables you to take advantage of potential growth, while deferring your tax obligation. Also, if you inherited a Roth IRA and, at least five full tax years have elapsed since the Roth IRA owner first established a Roth IRA, you can make tax-free withdrawals.

As a beneficiary, you can’t make additional contributions.

Generally, non-spousal beneficiaries (with certain exceptions, such as for minor children and beneficiaries who aren't more than 10 years younger than the original owner) must withdraw all funds from an inherited IRA within 10 years of the original owner's death. Different rules may apply to certain beneficiaries or if the original account owner died before January 1, 2020. For more guidance, see IRA Withdrawals or consult your tax advisor. 

The rules for if/when you must begin taking Required Minimum Distributions (RMD) and/or distribute all the account assets depend on your beneficiary classification and the date of death of the original IRA owner. You must take an RMD for the year of the IRA owner's death if the owner had an RMD obligation that wasn't satisfied.

You can expect to incur the typical Fund expenses and fees that are reflected in each Fund’s expense ratio. There are no additional account maintenance or transaction fees when you invest directly with Dodge & Cox.

If you inherit the assets of an IRA (including Traditional, Rollover, SEP, SIMPLE and Roth IRAs) or an eligible employer-sponsored retirement plan, you’re considered a "beneficiary" and you’re generally eligible to open an inherited IRA to receive the assets from the distribution of that prior account. The rules governing inherited IRAs can be complicated, and we recommend speaking with a tax advisor to fully understand your options and requirements.

If you inherit the account from your spouse, you have more flexibility than a non-spouse beneficiary. You can transfer or roll over your inherited proceeds into your own IRA and treat these assets as if they were your own (if you’re the sole beneficiary), or you can roll all or part into an Inherited IRA. For IRAs, the registration type of both IRAs must be the same (Traditional to Traditional or Roth to Roth).  

Keep in mind that if the original owner was taking Required Minimum Distributions ("RMDs") from the IRA, then the RMD due for the year of death must still be taken.

If you inherit an IRA from someone other than a spouse, you have fewer options. You must open an inherited IRA to receive the proceeds of the distribution, and you can’t treat the IRA as your own. This means you can’t contribute to the inherited IRA or roll over the assets into an IRA in your name. Non-spouse beneficiaries generally are required to receive distribution of the assets of the inherited IRA within 10 years of the original owner's date of death, with certain exceptions for beneficiaries no more than 10 years younger than the original owner, minor children of the original owner, and those who are chronically ill or disabled. The rules for non-spouse beneficiaries are complex and have recently changed. Different rules apply if the original owner died before January 1, 2020. We recommend speaking with a tax advisor to understand how those rules might apply to your situation.