Inherited IRA is Insured, but Tax Issues Can be Complicated, says NCUA

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.

Click here to read the legal opinion letter in its entirety.


Questions? Contact the Compliance Hotline: 1.800.546.4465,

Posted in Business Solutions, Compliance News, Industry Insight, NCUA.