How to Open an Inherited IRA: Step-by-Step Guide

The mechanics of inheriting an IRA are easy to get wrong. A mishandled distribution or a custodian check made out to you — not to the inherited IRA — can trigger an immediate, fully taxable distribution of the entire account balance. Here's how to do it correctly.

The critical rule first: If you are a non-spouse beneficiary, you cannot roll over an inherited IRA into your own IRA. You cannot take a distribution and redeposit it within 60 days. IRC § 408(d)(3)(C) explicitly prohibits 60-day rollovers for non-spouse beneficiaries.¹ The only way to move inherited IRA funds between custodians is via a direct trustee-to-trustee transfer. Spouses have different rules — see Step 1.

Step 1: Determine your relationship to the deceased and your options

Your rules depend entirely on your relationship to the original owner:

Surviving spouse: You have the most flexibility. You can (a) treat the inherited IRA as your own by rolling it into your existing IRA or opening a new IRA in your own name, or (b) maintain it as an inherited IRA in your name as beneficiary. The rollover-to-own-IRA option is only available to spouses — and the decision has significant planning implications. See Spousal Rollover vs. Inherited IRA for the four-scenario decision framework.

Non-spouse designated beneficiary: You cannot roll the funds into your own IRA. You must open a separate inherited IRA, titled in both names with you as beneficiary. You are subject to the SECURE Act 10-year depletion rule (with possible annual RMDs depending on whether the decedent had started RMDs — see Inherited IRA RMD Rules).

Eligible designated beneficiary (EDB): Surviving spouses, minor children, disabled individuals, chronically ill individuals, and beneficiaries not more than 10 years younger than the decedent qualify as EDBs and may still use the stretch IRA (life expectancy distributions) rather than the 10-year rule. See Eligible Designated Beneficiary Rules for the full EDB analysis.

Trust or estate as beneficiary: The trust or estate inherits the IRA, not the individual beneficiaries directly. The rules are complex — see Inherited IRA Trust Beneficiary Rules.

Step 2: Do not accept a distribution check

Before you contact the custodian, understand this: if you receive a check made out to you personally — rather than directly to an inherited IRA account — it is treated as a taxable distribution. The entire amount is includible in your income in the year of receipt, with no 60-day rollover option available to non-spouses.¹

Some custodians, especially smaller ones or financial institutions unfamiliar with inherited IRA rules, may initially offer to cut you a check for the balance. Refuse it. Insist on a direct trustee-to-trustee transfer to an inherited IRA — either at the same institution or at a new one you choose.

Step 3: Decide — stay with the current custodian or transfer

You have two options:

Keep the account at the decedent's custodian: The simplest path. The custodian retitles the existing account. No transfer paperwork, no new application. The downside: you're locked into that institution's investment options, fee schedule, and service quality. If the account is at a bank or insurance company with poor investment choices or high fees, consider a transfer.

Transfer to a custodian you choose: You can move the inherited IRA to any IRA custodian via direct trustee-to-trustee transfer. There is no limit on how many transfers you can do (unlike the one-per-year rule for regular IRA rollovers). The receiving custodian will provide their transfer paperwork.

Good custodians for inherited IRAs: Look for a custodian that explicitly supports inherited IRA accounts, accepts in-kind transfers of non-standard assets (if the original IRA held anything other than mutual funds), and has clear inherited-IRA documentation. Major brokerage custodians (Fidelity, Schwab, Vanguard) all handle inherited IRAs routinely.

Step 4: Open the inherited IRA account with the correct title

The account title must identify both the deceased original owner and you as the beneficiary. The format is flexible, but both names must appear and the word "deceased" (or "decedent") must be included. Common formats:²

[Decedent Name], deceased, IRA FBO [Your Name], beneficiary
[Your Name], beneficiary of [Decedent Name] IRA
IRA FBO [Your Name] (Beneficiary of [Decedent Name], Deceased)

"FBO" stands for "for benefit of." The exact format varies by custodian — the custodian's paperwork will specify their preferred titling. What matters is that the title preserves the decedent's name and makes clear you are holding this as a beneficiary, not as the owner.

Do not commingle. An inherited IRA must be held in a separate account from any IRA you own yourself. Mixing the two — even accidentally — can result in the entire inherited IRA being treated as a taxable distribution.

Step 5: Request a direct trustee-to-trustee transfer

If you are moving to a new custodian, initiate a direct transfer — not a rollover. The paperwork will ask the current custodian to transfer the assets directly to the new inherited IRA account. You never receive a check. The funds move institution-to-institution.

In-kind vs. liquidate: Most custodians can transfer assets in kind (without selling). This is often preferable to avoid being out of the market during the transfer. However, if the original IRA held proprietary funds that the new custodian cannot hold, you'll need to liquidate those positions first.

Timing: Transfers typically take 1–3 weeks. During this period, no distributions are owed unless you're past the year-end RMD deadline. If the decedent passed near year-end and had their own RMD obligation outstanding for the year of death, you (as beneficiary) must take that final year-of-death RMD before or after the transfer — it must still be taken.

Step 6: Gather required documents

Most custodians require some combination of:

Certified copy of the death certificate
Inherited IRA account application (custodian's form)
Transfer of assets / direct rollover request form
Copy of the beneficiary designation form (or affirmation that you are the named beneficiary — the custodian may pull this from their records)
Letters testamentary (if the estate is the named beneficiary and a fiduciary is acting on behalf of the estate)
Trust documents (if a trust is named and you are the trustee acting to transfer to a conduit or accumulation trust)

If you are a minor beneficiary, a parent or legal guardian will typically need to be involved in the account opening until you reach the age of majority under your state's law.

Key deadlines — do not miss these

Deadline	What it governs	Consequence of missing
9 months from date of death	Last day to file a qualified disclaimer under IRC § 2518 — effectively refusing the inheritance so it passes to the next beneficiary³	You are treated as having accepted the inheritance; cannot disclaim after this date
September 30 of the year after death	Beneficiary determination date — who counts as a designated beneficiary for RMD calculation purposes⁴	Beneficiaries who disclaim or die between the owner's death and this date drop out of the calculation
December 31 of the year after death	Deadline for multiple beneficiaries to establish separate accounts and get independent RMD treatment⁴	All beneficiaries must use the oldest beneficiary's life expectancy factor — potentially much less favorable
December 31 of the 10th year after death	Final depletion deadline for non-EDB beneficiaries under the SECURE Act 10-year rule	Remaining balance is fully taxable in that year, plus 25% excise tax

The year-of-death RMD: a step most people miss

If the original IRA owner died after their Required Beginning Date and had not yet taken their full RMD for the year of death, that remaining amount must still be distributed — but now it falls to the beneficiaries to take it. The year-of-death RMD is not waived because the owner died.

Practically: if your father died in October 2025 and had already taken $4,000 of his $18,000 annual RMD, the remaining $14,000 must be distributed from the inherited IRA by December 31, 2025. Multiple beneficiaries split the obligation proportionally. Failure to take the year-of-death RMD triggers the same 25% excise tax.

Common mistakes that trigger unexpected taxes

Accepting a check made out to you. Immediate taxable distribution. No cure available for non-spouses — once distributed, the money cannot go back into an IRA.

Attempting a 60-day rollover. IRC § 408(d)(3)(C) prohibits this for non-spouses.¹ The IRS will treat the distributed amount as ordinary income in the year of distribution.

Wrong account title. If the inherited IRA is opened in your name only — not as a beneficiary account with the decedent's name — it may be treated as your own IRA contribution (which it cannot be, since you haven't contributed) or as a distribution. Use the FBO format with both names.

Commingling with your own IRA. Even a temporary transfer to your personal IRA before "moving it back" is a taxable distribution.

Missing the December 31 separate-account deadline. If you and a sibling inherited the same IRA and do not establish separate accounts by December 31 of the year after your parent's death, both of you must use the older sibling's shorter life expectancy for annual RMD calculations. In some cases, this can force significantly larger annual distributions.

Forgetting the year-of-death RMD. Many custodians don't proactively flag this. If the original owner was past their RBD and died mid-year, check whether their annual RMD was fully satisfied — and take any shortfall before year-end.

If multiple people inherited the same IRA

See Multiple Beneficiaries on an Inherited IRA for the full analysis of the September 30 and December 31 deadlines, how separate accounts are established at the custodian, and what happens if a non-designated beneficiary (like a charity or estate) is one of the named beneficiaries.

Working with a specialist

The mechanics above are procedural — but the bigger question is what distribution strategy minimizes your total tax hit over the 10-year window. That depends on your current income, expected income trajectory, whether you should coordinate Roth conversions, your state's tax treatment, and a dozen other factors.

A fee-only advisor who specializes in inherited IRA planning can model your specific window, flag whether you qualify as an EDB, and coordinate the inherited IRA distribution with your broader tax plan. Use the form below to get matched.

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Sources

IRC § 408(d)(3)(C), prohibiting 60-day rollover by non-spouse beneficiaries. Confirmed in IRS Publication 590-B (2025) and Ed Slott and Company analysis.
Account titling requirements per IRS Retirement Topics — Beneficiary; FBO format conventions per custodian practice per Fidelity non-spouse inherited IRA guidance.
IRC § 2518(b) — qualified disclaimer requirements including the 9-month deadline. Reviewed in Ascensus disclaimer guidance.
September 30 beneficiary determination date and December 31 separate-account deadline per IRS Retirement Topics — Beneficiary and Vanguard inherited IRA RMD rules. Values verified as of April 2026.