Some people are lucky enough to receive a windfall when they die, and it may come in the form of an inherited IRA. While receiving an inheritance is exciting, it could also have multiple tax implications. Understanding the rules around inherited IRAs can help recipients and people planning to give an IRA to a loved one upon their passing. What is an Inherited IRA? An inherited IRA is an individual retirement account opened by the beneficiary of an IRA or workplace retirement plan. When an IRA is inherited, it can’t be left in the deceased’s account, so an inherited IRA must be opened. Note that the account must be opened in the original account owner’s name, and new funds can’t be contributed. Inherited IRAs and any distributions must be reported to the IRS using forms 1099-R and 5498. The types of accounts that can be transferred to an inherited IRA include traditional IRAs, Roth IRAs, 401(k)s, SIMPLE, and SEP IRAs. How to Manage an Inherited IRA Inherited IRAs can get complicated quickly. There are multiple options a beneficiary has when they receive one, which include