Inherited Roth IRA
It is my understanding that a non-spouse that inherits a Roth IRA will still have to take out RMDs, of course they will not be taxable- right?! If I am right the RMDs would be based on the father’s age, if he is over the age of 71 at time of death??
Permalink Submitted by Alan Spross on Mon, 2011-10-17 18:04
Tom is correct.
It would be extremely unlikely that any of these RMDs would be taxable since contributions come out before earnings. If the non spouse beneficiary limited distributions to only the RMD, the only way they would withdraw earnings would be if the owner had withdrawn most all of the contributed amounts, and left mostly earnings in the inherited Roth. This is very unlikely, but still possible.
Non spouse beneficiary also has a choice of using the 5 year rule because the Roth owner is always deemed to have passed prior to the RBD. Again, using the 5 year rule would destroy a much longer stretch, and would only be advisable in very unique circumstances, eg if there was an urgent need for funds around the 5th year, and no need for funds prior to that.
Permalink Submitted by Eric Woodfill on Mon, 2011-10-17 21:57
Alan, this there anyway that beneficiary would be taxed when and if he received this inherited Roth ???
Permalink Submitted by Alan Spross on Mon, 2011-10-17 22:05
Not just for changing title on it.
But if he took distributions, there are a couple highly unlikely scenarios as posted earlier under which the beneficiary could be taxed on any earnings distributed. After 5 years from the year the owner made his first contribution, any earnings would be fully qualified and therefore tax free.