Losing a loved one can bring grief, confusion—and sometimes, unexpected financial decisions. If you and your siblings inherited an IRA (Individual Retirement Account), understanding how to split it properly is essential. From navigating tax rules to making timely decisions, the process requires care and planning.
Below is a step-by-step guide to help you through it.
Can an IRA Be Split Between Siblings?
Yes. If you’re listed as a beneficiary on a traditional or Roth IRA, the account can be split between multiple people—including siblings. This is often done to ensure each beneficiary receives their share directly and can make independent decisions about how and when to access the funds.
Keep in mind: if the IRA designates the estate as the beneficiary instead of individuals, the account will need to go through probate first—adding time and complexity to the process.
What Rules Should You Know First?
The most important rule comes from the SECURE Act of 2019. If the original account holder passed away after December 31, 2019, non-spouse beneficiaries—including adult children—must fully withdraw the inherited funds within 10 years.
You don’t have to take the money all at once. You can spread it out over the 10-year period or withdraw it all in the final year. But one way or another, the account must be emptied within a decade.
Note: If you’re splitting the account, each sibling must transfer their portion into their own inherited IRA. You cannot roll it into an existing personal IRA.
What You’ll Need Before You Begin
To split an IRA, you’ll need:
- A copy of the certificate
- The name and social security number of the deceased
- Information about the account, including the institution that holds it
- Your own identification documents
- Beneficiary designation paperwork (if applicable)
Also, be prepared to complete forms from the financial institution. Each one may have different procedures for processing inherited IRAs.
Step-by-Step: Splitting an IRA Between Siblings
- Consult with a Financial Professional
Rules surrounding inherited IRAs are complicated—and mistakes can be costly. A financial advisor or estate attorney can guide you through your best options, especially when considering tax impacts. - Gather Documentation
Get the necessary paperwork ready, including the death certificate and account details. You’ll also want to review the IRA’s beneficiary designation to confirm your eligibility. - Talk to Your Siblings
While each person is entitled to manage their share separately, coordination can simplify the process. Discuss timelines, paperwork, and your shared responsibilities. - Submit Paperwork to the Financial Institution
You’ll need to request a transfer of your share into a new inherited IRA in your name. The account title should reference the original owner’s name and note that it’s inherited.
For example: “[Your Name] as beneficiary of [Deceased Name] IRA - Decide on a Withdrawal Strategy
You have 10 years to fully withdraw the funds. You can choose annual withdrawals, one-time disbursements, or wait until the final year. Work with your advisor to choose a tax-efficient plan.
Special Considerations for Roth vs. Traditional IRAs
Roth IRA
Withdrawals from an inherited Roth IRA are generally tax-free if the account was held for at least five years. Still, the 10-year rule applies. Since you’re not facing income taxes, you might consider waiting to withdraw until the end of the 10-year period.
Traditional IRA
Distributions are taxed as income. If you’re still working, spreading out withdrawals over time may prevent a large tax hit in any single year.
Final Thoughts: Why It’s Worth Getting It Right
An inherited IRA can be a meaningful financial legacy—but only if handled carefully. Whether you want to honor your parent’s wishes or make the most of a new financial opportunity, planning with the right professionals can ensure you and your siblings make smart, tax-efficient decisions.
