Self-Directed IRA -Can I Self-Direct an Inherited IRA?

Yes, you can use Self-Directed IRA strategies using inherited IRA assets.

This means that even if you inherit a very conventionally-invested IRA full of mutual funds, stocks, money markets, bonds and CDs, you can direct IRA assets into a Self-Directed IRA account. This allows you to invest in a much broader array of asset classes, including but not limited to:

  • Rental real estate
  • House flipping
  • Partnerships
  • LLCs
  • Oil and gas
  • Land banking
  • Private lending
  • Private banking
  • Gold and precious metals
  • Limited partnerships
  • Non-publicly traded REITs, business development companies and other closely held corporations
  • Farms and ranches

…And much more. The only things you are restricted from owning within a Self-Directed IRA are life insurance, alcoholic beverages, jewelry and gemstones, collectibles and certain kinds of precious metal coin or bullion of uncertain or insufficient purity and consistency.

However, if you inherit an IRA from someone other than your spouse, or you are approaching age 70 or older, you should be aware of IRA rules that require you to begin taking money out in the form of required minimum distributions, or RMDs. You will need to have enough liquidity in your IRA to take your RMD every year.

If you inherit an IRA from your spouse, you have a couple of options not available to others. For example, you can roll your late spouse’s IRA into your own IRA, or you can elect to treat it as your IRA in your own name instead of your spouse’s. If you are younger than your late spouse, this may help you put off required minimum distributions and defer taxes on earnings in your inherited IRA until later. As a surviving spouse, you may also be able to access some income prior to reaching age 59 ½, if needed, without paying the 10 percent penalty that normally applies to early distributions. Speak with your tax planner for more information.

If you inherit an IRA from someone other than your spouse, you can’t just roll the assets over into your own IRA. Instead, you must take the same RMDs as the late IRA owner would have had to take had he or she not passed away. Alternatively, you can take a full distribution of the entire IRA. But that would result in substantial taxes and penalties, potentially at a higher marginal tax rate than you would be paying if you spread the income out over multiple years.

American IRA has worked with many owners of inherited IRAs over the years. The rules concerning inherited IRAs are complex and sometimes counterintuitive. You don’t want to be making decisions regarding your inherited IRA without some outside help. Mistitling an asset, for example, or accidentally taking physical possession of an IRA asset can cause substantial tax liability and penalties. Our role is to handle the transactions on your behalf  – whatever the investment – and help you stay in compliance with applicable IRA regulations and tax laws. We work with your existing tax expert and financial advisor to ensure that the transactions they recommend and you authorize are executed with timeliness, efficiency and accuracy  – normally at a fraction of the assets under management fees normally charged by conventional investment companies!

Have you inherited IRA assets? Are you interested in a Self-Directed IRA? Then visit us online at, or call us at 866-7500-IRA. We look forward to working with you!