The Difference Between Inheriting an IRA vs. Assuming an IRA

When you open an individual retirement account, you're allowed to select one or more beneficiaries. After you die, your IRA will pass to whomever you designated, without having to go through probate. The two ways an IRA can pass to a beneficiary are through inheritance or assumption. Both occur after your death.

Whether your heirs inherit or assume your IRA depends on who your beneficiaries are. It is important to know the difference before putting anything in writing in your financial records.

According to the IRS, inheriting an IRA means that you receive the assets in someone else's IRA after they die. The owner of the IRA must have named you in writing as a beneficiary. You might have to share the IRA with other beneficiaries, as the original account owner can choose to divide the IRA among as many heirs as desired. With multiple heirs, an account owner typically specifies what percentage of the IRA each will receive.

Assumption of an IRA is a special form of inheritance. If an heir assumes an IRA, he transfers the assets into his sole name. The Internal Revenue Service will treat the IRA as if it had always belonged to the assuming owner.

Not all heirs can choose to assume an IRA. Only a spousal beneficiary has the choice between assuming or inheriting an IRA. Even a spouse cannot assume an IRA unless he is the sole beneficiary of the original account owner. All other types of beneficiaries, even immediately family members, do not have the option to assume an IRA. They can only inherit it.

If you assume an IRA, you convert the assets to an IRA in your own name. If you have an existing IRA, you can transfer the assets into that IRA. Otherwise, you can establish a new IRA. Because the IRA will be only in your name, you can make contributions to it, just as you would if the IRA had always been in your name.

One of the main advantages of assuming an IRA, as opposed to inheriting it, is that you don't have to immediately begin taking annual distributions. The IRS says that, under the SECURE Act of 2019, if your 70th birthday falls on or after July 1, 2019 then you won't have to take RMDs (required minimum distributions) out of your assumed IRA until you're age ​72​.

If you inherit an IRA, you cannot retitle it in your own name. The account must be titled as belonging to the deceased owner, with you as beneficiary. You cannot add to an inherited IRA, and you cannot roll it over into an IRA in your own name. Additionally, you'll have to take annual distributions based on either the decedent's life expectancy or your own, as determined by IRS tables.