What is the deal with people having to pay taxes on money that is inherited?
QUESTION: A listener thought people could inherit money tax free up to a certain amount. Why does the previous caller have to pay taxes on the money he inherited from his father’s retirement savings?
ANSWER: You cannot roll an inherited, tax-treated retirement account to your IRA or 401-K unless it is your spouse’s retirement account. These retirement investments are pre-tax and that’s why you have to pay income taxes on it, not because it’s an inheritance. There is no penalty though.
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