Roth IRA – spousal beneficiary

Submitted by ShipsnGiggles on Mon, 2016-11-14 13:49

Roth IRA owner died in 2016
surviving spouse, 50, inherited
Surviving spouse requested custodian to retitle IRA as her own

Questions
Is the spouse (now as owner) eligible to withdraw the basis tax free? I would think so
Is the spouse again as owner eligible to withdraw earnings (assuming 5 year hold period has been met)? I would think “no” because she is now the owner of the account and has not reached 59.5 (she is 50) whereas it would be “yes” if she remained a beneficiary

All help is appreciated.

Thank you



Submitted by Alan - IRA critic on Mon, 2016-11-14 17:20

  • You are correct in all assumptions. She would have to determine the regular contributions and conversions basis in the Roth. These amounts could be distributed tax free, but the earnings would not become qualified until she reached 59.5. If she needed the earnings distributed, then she should leave the Roth titled with her as beneficiary, not owner. As the beneficiary she could withdraw the entire balance tax free, since his death would have made his Roth qualified since the 5 year period has also been met.
  • What is confusing when the surviving spouse assumes ownership or rolls it over is that distributions are only qualified when she reaches 59.5 if the 5 year holding has also been met, but the holding periods of her husband remain in place, both the year of his first contribution and the year of any conversions he did.

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