If there was no designated beneficiary on the Roth IRA, the Roth agreement should be examined to determine the default beneficiary. Most likely, the default beneficiary is the surviving spouse OR the decedent’s estate. If the estate receives the funds, the 5 year rule will apply.

There is also an option to make a qualified trust the Roth beneficiary. For a qualified trust, the life expectancy of the oldest trust beneficiary can be used, and that will also avoid the 5 year rule.

The 5 year rule applies to all kinds of retirement plans when the owner passed prior to the RBD and states that the account must be drained by the end of the 5th year following the year of death. However, if there is a designated beneficiary or qualified trust named as beneficiary, then life expectancy RMDs become the default rule. For a Roth IRA, owners are deemed to pass prior to the RBD in all cases because there is NO beginning date for Roth IRA owners. Without a beneficiary then, the 5 year rule will come into play.

To summarize:
1) Roth IRA owner dies and is deemed to have died prior to the RBD
2) If there is a designated beneficiary or qualified trust beneficiary, life expectancy is the default rule, but the 5 year rule can still be elected if desired
3) If the estate is the named or default beneficiary, 5 year rule is mandatory even if the will names an individual as the estate beneficiary.

NOTE: If a sole spousal beneficiary inherits the Roth IRA, they can roll it over and be treated as if they owned the Roth IRA all along.

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