Inherited IRA is Insured, but Tax Issues Can be Complicated, says NCUA
June 28, 2011
June 28, 2011
Under the right circumstances, an individual retirement account (IRA) with a designated beneficiary would continue to receive separate federal share insurance coverage after the owner’s death, according to a recent National Credit Union Administration (NCUA) legal opinion letter.
According to the June 6th letter, the NCUA’s regulations provide share insurance coverage for a member’s IRAs up to a maximum of $250,000 that is separate from the member’s other accounts at the same credit union. [12 C.F.R. §745.9-2(c)(1)].
With respect to an inherited IRA, the agency share insurance coverage will continue up to the $250,000 maximum, separate from the share insurance coverage for other IRAs and accounts owned by the designated beneficiary, if certain conditions are met.
Those conditions include:
- The inherited IRA continues to be maintained in the name of the decedent;
- The Internal Revenue Code and other applicable tax laws recognize the continued existence of the IRA after the death of the decedent;
- The Internal Revenue Code and other applicable tax laws consider the named beneficiary as a qualified designated beneficiary for tax regulatory purposes; and
- The inherited IRA is not commingled with other IRAs owned by the designated beneficiary.
The letter reminds credit unions that issues related to tax-advantaged savings accounts are governed by the Internal Revenue Code and other applicable tax laws.
Questions? Contact the Compliance Hotline: 1.800.546.4465, email@example.com.