Did you recently inherit an IRA from a family member? If so, then there are some steps you need to take to avoid common mistakes. Retirement accounts tend to have a lot of confusion surrounding them for this reason.

If you inherit an IRA, you’re responsible for figuring out how to handle it. Unfortunately, there's no class you can take to understand what to do with your IRA.

After all, you'll need to deal with estate planning, paying taxes, and more. It can be a lot to handle if you aren't sure what to do. Luckily, we're here to clue you in on crucial steps to take after you inherit a retirement account.

Give Your IRA a Title

First, you'll need to ensure that your IRA has an appropriate title. You should look for two critical things on the title of your IRA:

• The name of the original owner (deceased)
• An indication that you inherited the IRA

If the IRA is from your spouse, then you have the option of depositing the contents of the IRA into your account. If you want to take this route, you need to act within 60 days of inheriting the IRA.

If the account doesn’t come from your spouse, then you can’t move the money into your personal account. Instead, you need to start a Benefit or Inherited IRA in your name. That will enable you to transfer the assets from the inherited IRA to your new account.

Calculate Distribution Amounts

If you inherit the IRA from your spouse, then the year-end account value will determine your distribution rate. An example would be using the account value from December 31, 2019, for 2020.

If you inherit an IRA from someone other than your spouse, then the rules are different. In this case, you have 10 years to withdraw the entirety of the account. If you go beyond that period, you'll lose the remainder of the assets.

Find Out if Your IRA Has an After-Tax Basis

This is a crucial step that you shouldn’t skip. Fill out IRS Form 8606 to determine if your inherited IRA has an after-tax basis. If so, you can claim the non-deductible part of the required minimum distribution.

Plan for Paying Taxes

Lastly, you'll need to know how to handle the taxes for your inherited account. Roth IRAs and standard IRAs have differing rules here. Minimum distributions are often tax-free for Roth IRAs. That means if you plan on withdrawing the minimum amount each time, you won't have to pay taxes. Standard IRAs are different and are often fully taxable. That means you'll need to pay taxes on your distributions.

Those are the steps you'll need to take once you inherit a retirement account. By checking all these boxes, you'll be able to enjoy your inherited retirement account without any stress. Remember to ensure your account has a proper title, configure your distribution amount, and discover if you need to pay taxes.