Non spousal inherited ROTH IRA

Submitted by Sanford Rosenthal on Fri, 2018-05-11 15:24

Question

Mom opened up Roth IRA in 2012
Mom passed in 2016 and left to the husband
Unfortunately new Roth Spousal account wasn’t opened up until January 2018 (Age 90)
Father passed in March 2018 and left to his son and is in the process of opening up a non spousal inherited Roth IRA. Son is 69

Son has a question
Can he take out all the money now and is it taxable? In order to receive the funds from pershing he needs to open up a inherited Roth Account.

Thank you

Sanford Rosenthal



Submitted by Alan - IRA critic on Fri, 2018-05-11 19:00

  • The Roth became qualified at the end of 2016 by meeting the 5 year holding period after death of the Roth owner. Therefore all distributions starting in 2017 are tax free and do not need to be reported on Form 8606, only on line 15a of Form 1040. 
  • While the son can certainly drain the inherited Roth tax free, he will be losing all FUTURE tax free earnings that would have been generated on the inherited Roth. Therefore, he might want to rethink the lump sum distribution.
  • Son might be interested in what his RMD would be if he did not take the lump sum distribution. Assuming by “spousal Roth” you mean that father elected to be treated as the owner of his inherited Roth in 2018, the son is treated as a designated beneficiary and his RMDs as beneficiary would start in 2019 using his age on 12/31/2019.

 

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