Satisfying the Roth Five-Year Rule
James died in late 2016 leaving his Roth IRA to his children. He had had the Roth for well over five years. Now James’ son, David wants to take a withdrawal from the account. Isn’t the five-year rule satisfied? David doesn’t have to hold the Roth for five years after the inheritance, does he?
Permalink Submitted by Alan - IRA critic on Wed, 2018-04-25 23:02
The 5 year holding period dates back to the first year James made a valid Roth contribution. Therefore, this inherited Roth is fully qualified and tax free. Of course, any distributions in excess of the beneficiary RMDs will remove funds that will otherwise generate tax free gains over time. Beneficiary distributions do not need to be reported on Form 8606, just on line 15 of Form 1040 (15b will be blank) since the Roth is qualified.