Do heirs have to pay tax money from an IRA?

Minnesota estate planning attorney Karen Schlotthauer explains that heirs of an IRA do have to pay some income taxes.

Contact Karen Schlotthauer

Email: [email protected]

Phone: (612) 336-9324

Transcript:

Do you have to pay taxes on money coming out of an IRA? IRAs, retirement plans, those are assets where money goes in on a tax-deferred basis or a pre-tax basis. And so when it comes out, the recipient does have to pay income taxes on the amount coming out. So let’s say I’m going to receive $100.00 from my mom’s IRA. There’s a rule that applies. I have to take out the required minimum distribution after her death, but that’s based on my remaining life expectancy. So I’ll be able to spread out that $100.00 over many, many years with my long life expectancy, which is a good thing because as the money stays in that account, it continues to grow on a tax-deferred basis.