Spouse inheriting a Roth IRA
I thought that if a spouse inherited a Roth, they too would not have RMDs only if a non-spouse inherits it. It seems everything I’m reading now says you don’t have RMDs for your Roth but ALL beneficiaries do.
I thought that if a spouse inherited a Roth, they too would not have RMDs only if a non-spouse inherits it. It seems everything I’m reading now says you don’t have RMDs for your Roth but ALL beneficiaries do.
Permalink Submitted by Al Fry on Mon, 2009-10-26 18:10
I am not sure what reason there would be for a spouse to “inherit” a Roth. If the spouse were the beneficiary of the deasesed spouse’s Roth, they could roll it to themselves, then no RMDs would be due. There MAY be a situation where a spouse would take it as an inherited contract, which I’ll let others on this forum address.
Permalink Submitted by dan casey on Mon, 2009-10-26 18:28
I’m not sure why I used the word ‘inherit’ because you are right. So then they would just roll into into their own and then would not have any RMDs. So then I could say any NON-spouse beneficiaries will have RMDs, spouses will not if they roll it into their own Roth.
Permalink Submitted by Alan Spross on Mon, 2009-10-26 21:14
Some Roth agreements will automatically default to ownership if the surviving spouse is sole beneficiary. But if there are also children as beneficiaries, this does not apply, and the surviving spouse actually has to do a rollover to get the Roth out of inherited status and eliminate the need for RMDs as an inherited IRA. Moreover, if separate accounts are not created by the end of the year following death, the age of the oldest beneficiary will determine the RMDs for all of them. The children could then be stuck with inherited Roth RMDs based on the life expectancy of a parent, who was the oldest beneficiary when designated beneficiaries were determined.
If the surviving spouse is the sole Roth beneficiary and the agreement does NOT make ownership automatic, then the spouse is subject to RMDs that would not be required until the year the owner spouse would have reached 70.5. At anytime the survivor can roll this Roth over or if they fail to take an RMD, they are assumed to have made the account their own.
There is ONE scenario where the surviving spouse is better off NOT assuming ownership if the Roth agreement does not automatically make them owner. Assume Spouse A, the Roth owner passes before that Roth was qualified. Spouse B, under 59.5, does not have a Roth of their own and needs all the money right away. If they assume ownership, the earnings in the Roth will be taxed and penalized. However, if they leave the Roth in inherited status and drain it, the earnings will still be taxable, but there will be NO penalty under the death exception.
Permalink Submitted by Al Fry on Mon, 2009-10-26 23:37
And of course if they waited until the balance of the 5-year period expired before taking out the earnings on the inherited IRA, that would tax-free, as well.