You can move inherited IRA money to checking, but the IRS treats it differently depending on your relationship to the person who died

If you inherited an IRA, you can move money from it to a regular checking account. However, the IRS requires you to follow specific rules based on whether you were the spouse of the person who died, or a non-spouse beneficiary. The rules determine how much you can withdraw, when you must withdraw it, and how much tax you owe on the withdrawal. Moving money without following these rules can trigger unexpected tax bills and penalties.

The key difference: spouses have more flexibility to treat the inherited IRA as their own, while non-spouse beneficiaries must keep the inherited IRA separate and follow a withdrawal schedule set by federal law.

Key Takeaways

  • Spouse beneficiaries can roll an inherited IRA into their own IRA or treat it as their own, then withdraw money to checking with no special restrictions beyond normal IRA rules.
  • Non-spouse beneficiaries must keep the inherited IRA in a separate account and cannot roll it into their own IRA, but can still withdraw money to checking as long as they follow the required withdrawal schedule.
  • All withdrawals from an inherited IRA are taxed as ordinary income in the year you withdraw them, regardless of whether the original IRA was traditional or Roth.
  • The IRS requires most non-spouse beneficiaries to withdraw the entire inherited IRA within 10 years of the account holder's death, with specific annual withdrawal amounts required in some cases.
  • Your IRA custodian (the bank or brokerage holding the account) can transfer money directly to your checking account, but you must tell them you are a beneficiary and provide documentation of the death.

What happens if you were the spouse of the person who died

As a spouse beneficiary, you have the most options. You can roll the inherited IRA into an IRA in your own name, treat the inherited IRA as your own by retitling it, or leave it as an inherited IRA and name yourself as beneficiary. Each choice changes how and when you can withdraw money.

If you roll it into your own IRA or treat it as your own, you can withdraw money to your checking account whenever you want, following the same rules that apply to any IRA you own. You will owe income tax on the withdrawal, but you will not face an early withdrawal penalty if you are under 59½ (unless the original account holder was under 59½ and had not yet started taking required distributions). If you leave it as an inherited IRA instead, you must follow the withdrawal rules for non-spouse beneficiaries.

The choice matters most if you are younger than 59½ and need money soon. Rolling it into your own account gives you more control. Leaving it as an inherited IRA locks you into a withdrawal schedule but may offer more tax planning flexibility if you do not need the money immediately.

What happens if you were not the spouse

Non-spouse beneficiaries—adult children, parents, siblings, or other relatives—cannot roll an inherited IRA into their own account. The IRS requires you to keep it in a separate inherited IRA in the deceased person's name, with you listed as beneficiary. You can still withdraw money to your checking account, but you must follow a withdrawal schedule.

The withdrawal rules depend on when the account holder died. If they died in 2023 or later, you must withdraw the entire inherited IRA by December 31 of the tenth year after their death. The IRS does not require you to take a specific amount each year during those ten years—you can take it all at once, spread it out, or take nothing for several years as long as the account is empty by the deadline. However, if the account holder had already started taking required distributions before they died, you must continue taking those annual distributions.

You can request a direct transfer from the IRA custodian to your checking account at any time. The custodian will withhold 20 percent for federal income tax unless you request a direct trustee-to-trustee transfer (which moves the money between financial institutions without passing through your hands). Even with withholding, you will owe income tax on the full amount withdrawn when you file your tax return.

How taxes work on inherited IRA withdrawals

Money you withdraw from an inherited IRA is taxed as ordinary income in the year you withdraw it. This is true whether the original IRA was a traditional IRA (which held pre-tax money) or a Roth IRA (which held after-tax money). The difference is that Roth withdrawals are tax-free to you as the beneficiary, while traditional IRA withdrawals are fully taxable.

If you withdraw a large amount in a single year, you may move into a higher tax bracket and owe more tax than if you spread the withdrawals across multiple years. This is why some beneficiaries choose to take smaller amounts each year rather than emptying the account all at once. However, you must withdraw the entire balance by the deadline, so you cannot avoid the tax—only delay when you pay it.

The IRA custodian will send you a Form 1099-R in January showing how much you withdrew and how much federal tax was withheld. You will report this on your tax return. If too much was withheld, you will get a refund. If too little was withheld, you will owe the difference when you file.

The steps to move inherited IRA money to checking

Contact the IRA custodian (the bank, brokerage, or financial institution holding the inherited IRA) and tell them you are the beneficiary and want to withdraw funds. You will need to provide a copy of the death certificate and proof of your identity. Some custodians require additional documentation, such as a certified copy of the will or a letter from an estate attorney.

Ask the custodian whether they can do a direct transfer to your checking account or whether you need to request a check. A direct transfer is faster and reduces the risk of the check being lost or delayed. Tell the custodian the amount you want to withdraw and the checking account number and routing number where you want the money sent.

Ask the custodian about tax withholding. If you want federal income tax withheld from the withdrawal, tell them the percentage (usually 10, 20, or 25 percent). If you do not want withholding, you can request that in writing, though the custodian may still be required to withhold 20 percent in some cases. The money should arrive in your checking account within three to five business days for a direct transfer, or one to two weeks if they are sending a check.

What to do if the inherited IRA is at a bank that has closed or merged

If the original account holder opened the IRA at a bank that no longer exists or has been acquired by another bank, the account may have been transferred automatically to the acquiring bank. Contact the Federal Deposit Insurance Corporation (FDIC) or the acquiring bank to locate the account. Provide the deceased person's name, Social Security number, and the approximate date the account was opened.

If the account was at a brokerage that closed, contact the Securities Investor Protection Corporation (SIPC) or search the SIPC website for information about where customer accounts were transferred. Once you locate the account, follow the same steps as above to withdraw money to your checking account.

Penalties and mistakes to avoid

The most common mistake is missing the withdrawal deadline. If you are a non-spouse beneficiary and do not withdraw the entire inherited IRA by the required date, the IRS will charge a 25 percent penalty on the amount that should have been withdrawn but was not. This penalty is in addition to the income tax you owe. If you realize you have missed a deadline, contact a tax professional or the IRS immediately to see whether you can request a waiver.

Another mistake is withdrawing money without understanding the tax impact. A large withdrawal in a single year can push you into a higher tax bracket or trigger other tax consequences, such as reducing your may be able to access for certain tax deductions or credits. If you think you will need to withdraw a large amount, talk to a tax professional before you do it so you can plan the timing and amount.

Do not assume that because the money was in an IRA, it is not taxable to you. All inherited IRA withdrawals are taxable income except for Roth IRA withdrawals to a beneficiary. Even if the original account holder paid taxes on the money when they earned it, you will owe tax again when you withdraw it.

Frequently Asked Questions

Can I withdraw inherited IRA money without paying taxes?

No, except for Roth IRA withdrawals. Money you withdraw from a traditional inherited IRA is taxed as ordinary income. Roth IRA withdrawals to a beneficiary are tax-free. In both cases, you must follow the withdrawal rules based on your relationship to the deceased account holder.

What if I need the money before the 10-year deadline?

You can withdraw it whenever you want, as long as you withdraw the entire balance by the deadline. There is no early withdrawal penalty for inherited IRAs, even if you are under 59½. You will owe income tax on the withdrawal, but not a penalty.

Do I have to withdraw inherited IRA money all at once?

No. Non-spouse beneficiaries can spread withdrawals across the ten-year period as long as the account is empty by the deadline. Spouse beneficiaries who roll the IRA into their own account can withdraw whenever they want. If the account holder had already started required distributions, you must continue taking those annual amounts.

What if the inherited IRA is worth less than when the person died?

You still owe income tax on whatever you withdraw, based on the value at the time of withdrawal. If the account lost value, you cannot deduct that loss on your tax return. You only owe tax on the money you actually take out.

Can I transfer inherited IRA money to someone else's checking account?

No. The money must go to an account in your name. If you want to give money to someone else after you withdraw it, you can do that, but the withdrawal itself must be to your own account and you will owe the income tax.