Managing inherited investment accounts

Inheriting an investment account is often more emotional than financial. It represents a loved one’s legacy and your responsibility to manage what they’ve built with care and purpose. Whether the assets are held in an IRA or a brokerage account, understanding your options helps you make decisions that align with your goals and honor theirs.

Inherited IRAs

If you inherit an IRA, your next steps depend largely on your relationship to the original account holder.

If you’re a spouse: You may have the option to treat the IRA as your own, roll it into an existing IRA, or continue it as an inherited IRA. Each choice has tax and timing implications.

If you’re a non-spouse: You’ll generally need to withdraw all assets within 10 years under current IRS rules, though certain beneficiaries—like minor children or individuals with disabilities—may have exceptions.¹

Tax tip: Withdrawals from traditional IRAs are usually taxable, while Roth IRAs are typically tax-free if conditions are met. A financial advisor can help time your withdrawals to manage taxes effectively.

Inherited brokerage accounts

Inherited brokerage accounts don’t come with required distributions, but they do involve decisions about how to handle the assets. These accounts usually receive a “step-up” in cost basis, meaning the investment’s value resets to its market value on the date of inheritance. This can reduce capital gains taxes when you sell investments.²

You can keep, sell, or reinvest the assets based on your goals and risk tolerance. Before making changes, it’s wise to review the portfolio’s diversification and ensure it fits your financial plan.

Required distributions

If the original account owner had begun required minimum distributions (RMDs), you may need to continue taking them depending on the type of account and your relationship to the deceased. Missing an RMD can lead to penalties, so reviewing deadlines early can prevent costly mistakes.

Beneficiary checklist

Here’s a quick guide to help you stay organized as you navigate inherited accounts:

• Confirm the type of account(s) you’ve inherited (IRA, Roth IRA, brokerage, etc.)
• Obtain copies of the death certificate and account statements
• Notify the financial institution and verify your beneficiary status
• Review distribution requirements and deadlines
• Understand potential tax implications
• Consider whether to keep, sell, or reinvest assets
• Align inherited assets with your personal financial plan
• Consult your financial advisor before taking withdrawals or transfers

FAQs

Do I have to take money out of an inherited account right away?

• Not necessarily. For brokerage accounts, you can usually keep the investments as they are. For IRAs, you may have specific distribution rules to follow depending on your situation.

Will I owe taxes on what I inherit?

• You won’t owe federal tax on the inheritance itself, but you may owe taxes on earnings, withdrawals, or capital gains.

What if I inherit multiple accounts?

• Each account may have different rules and timelines. Consolidating or coordinating them under one advisor can simplify management.

A thoughtful approach

Receiving an inheritance is about more than financial assets—it’s about stewardship. Managing those assets wisely helps preserve the legacy you’ve been entrusted with and supports your own long-term goals. With clear guidance and a steady plan, you can make confident decisions that honor both.

Sources cited

1 IRS Publication 590-B, “Distributions from Individual Retirement Arrangements (IRAs),” explains that most non-spouse beneficiaries must withdraw all assets by the end of the 10th year after the original owner’s death, with some exceptions. https://www.irs.gov/publications/p590b

2 IRS FAQ, “Gifts and Inheritances,” states that the basis of inherited property generally equals its fair market value at the date of death. https://www.irs.gov/faqs/interest-dividends-other-types-of-income/gifts-inheritances/gifts-inheritances