In most cases the spouse would roll over their portion to their own Roth IRA. That would avoid RMDs and provide for separation of accounts from the others. The only downside is if the spouse needs to tap the inherited Roth to the point where earnings are distributed prior to the completion of 5 years from the year of the decedent’s first Roth contribution. The earnings would then be penalized as well as taxed unless the survivor was over 59.5. If the spouse needs to keep their share as inherited, they should still create a separate account no later than the end of the year following year of death.

The non spouse beneficiaries on the other hand will be subject to RMDs in any event. So they should create separate accounts by direct transfer no later than the end of the year following the year owner passed. They can then use their individual life expectancies for RMDs. These non spouse inherited Roth IRAs would be totally tax free after 5 years from the year of the decedent’s first Roth contribution.

The non spouse beneficiaries have the above deadline but the surviving spouse can do the rollover without a deadline. If no action is taken by any of them by the end of the second year, then the non spouse beneficiaries will have to use the age of the oldest beneficiary for RMDs ie. the surviving spouse, so this would impair their ability to stretch the inherited Roth.

The actual title on inherited IRAs can vary according to the custodian’s requirements, but the names of both the original owner and the beneficiary must be shown. For an individual inherited Roth the SSN will be that of the beneficiary. These beneficiaries also need to name their own successor beneficiary ASAP.

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