How to open an inherited IRA

How to open an inherited IRA

An inherited individual retirement account (IRA), also known as a beneficiary IRA, is available to a designated beneficiary upon the death of the original IRA holder.

The beneficiary may not leave the assets in the original account holder's IRA and continue distributions. The beneficiary opens an inherited IRA and chooses to take distributions that satisfy the required minimum distribution rules or a lump sum distribution. A spouse may also roll over the assets into his/her personal IRA.

If the new inherited IRA is funded by assets transferred or rolled over from another institution, it can be opened using digital onboarding, DocuSign® or paper forms.

All accounts
In addition to the information above, the following may be required:
Trust beneficiaries

If the account holder is a trust, the following pages of the trust document are required:

  • Title page(s) with name and date of the trust
  • Successor trustee provisions and any relevant amendments, including page with notarized stamp
  • Signature page
Roth IRAsThe date the account was opened and the date of the first contribution by the decedent
Additional features
Account opening methodSchwab recommends using digital onboarding for the fastest, most secure experience for you and your clients. For details, see How to use digital onboarding.

Digital onboarding supports account open, funding, and set up of Inherited IRA accounts for individual beneficiaries.

For details on this process, see How to use digital onboarding.

This process is used when opening an inherited IRA using paper forms:

  1. Select the applicable form below to open the Forms library page on Schwab Advisor Center. Click Select, and then select Open PDF.
    • Inherited IRA Account Application for Individual Beneficiary
    • Inherited IRA Account Application for Organization Beneficiary Form
    • Inherited IRA Account Application for Trust Beneficiary Form
    • Inherited IRA Account Application for Estate Beneficiary Form
  2. Complete all necessary fields and ensure all additional features the client requested have been added.
  3. Obtain signatures from all account holders and submit to Schwab.
    • Option 1: Print forms, obtain wet signatures, and send the signed form(s) to your Schwab service team via a Schwab Advisor Center service request.
    • Option 2: Save forms to your computer or fileserver as fillable .pdf files, and send forms for electronic signature by following the How to use DocuSign procedures.

Once you have submitted your request:

  • Schwab will send your clients standard communications about their IRA once it's been opened.
  • If you have questions about opening an inherited IRA, call your service team.

Go to the Forms library on Schwab Advisor Center and select the forms below.

Form: Inherited IRA Account Application for Estate Beneficiary Form
Form: Inherited IRA Account Application for Individual Beneficiary
Form: Inherited IRA Account Application for Organization Beneficiary Form
Form: Inherited IRA Account Application for Trust Beneficiary Form
Form: Options Trading and Margin Application
Form: MoneyLink (ACH)
Form: Power of Attorney (Individual POA)
Resource: You've just inherited a retirement account. Now what?
Resource: Digital onboarding education

What is Schwab's policy for naming beneficiaries for inherited IRAs?
Schwab will individually permit inherited IRA holders to name other, subsequent beneficiaries for the IRAs they inherit. Trust, estate, and minor inheritors may not name a designated beneficiary.

What is Schwab's policy for non-spouse beneficiaries for inherited IRAs?
An IRA holder may name a beneficiary for their account. At the death of the IRA holder, the beneficiary will receive the proceeds of the IRA and may open an Inherited IRA to preserve the tax deferral. The beneficiary is not required to distribute the assets immediately; however, the beneficiary should consult a tax advisor about required minimum distributions and requirements to distribute assets.

If the client is a spousal beneficiary, can they treat the IRA as their own?
Yes. They can transfer the existing IRA into their name and defer distributions until required to take the Required Minimum Distribution (RMD). If your client plans to take a distribution before reaching age 59 1/2, they can open an Inherited IRA to avoid early withdrawal penalties. Encourage your client to consult a tax advisor for more details.

Is the original account restricted after the account holder's death?
Yes. The account holder's death will result in the account passing to a designated beneficiary or the owner's estate. The account is restricted until distribution to the named beneficiary. The advisor's relationship with the account holder terminates upon the death of the client.

Can the client designate per stirpes or per capita beneficiaries by writing per stirpes or per capita on the account form?
No. To prevent the risk of beneficiary payouts that differ from the account holder's intentions, Schwab does not accept written instructions on the account application. To select per stirpes or per capita designation, complete a separate IRA beneficiary designation form that contains the specific per stirpes and per capita options.

How does the SECURE Act impact beneficiaries for inherited IRAs?
The inherited assets must be withdrawn by Designated Beneficiaries within 10 years following the death of the decedent. However, the 10 year distribution rule Tooltip  excludes the assets left to certain beneficiaries called Eligible Designated Beneficiaries:

  • Surviving spouse
  • Minor child of the decedent (at age of majority, assets must be withdrawn within 10 years)
  • Disabled or chronically ill individual
  • Individual who is no more than 10 years younger than the decedent

For non-designated beneficiaries such as an estate, a charity, and a trust that does not qualify as a see-through trust, these distributions will be covered under the pre-SECURE Act 5 Year Rule Tooltip .

How to add and update account beneficiaries
How to add features to an account
How to handle deceased clients' assets
How to handle deceased clients' assets in organization accounts
How to use digital onboarding
Introduction to householding
Introduction to options trading
Introduction to required minimum distributions (RMDs)
Introduction to inherited IRAs