combining spousal bene Roth IRA w/ind. Roth IRA

Submitted by cy roseman on Wed, 2019-05-15 15:11

Is it possibleto combine an inherited spousal Roth IRA with an ind. Roth IRA? If so, how is this done?

Permalink Submitted by Alan - IRA critic on Wed, 2019-05-15 15:24

Yes, this is best done by electing to assume ownership of the inherited Roth as long as the surviving spouse was the sole beneficiary. Once this is done the account can be transferred in a non reportable transfer to their existing Roth IRA. This avoids exposure to the one rollover limitation that would occur if a distribution was made.
The only situation in which there is a benefit to maintaining a spousal inherited Roth IRA is if conversions under 5 years or earnings need to be distributed and the surviving spouse is under 59.5. In those situations if the surviving spouse becomes the owner, there will be a 10% penalty on these amounts. Note that if these Roth accounts are combined the 5 year holding period starts with the first year either spouse made a contribution and the 5 year holding period for conversions to avoid the 10% penalty starts in the year the conversion was done. The surviving spouse needs to figure out the composition of any new combined Roth unless their existing Roth was already qualified (5 years plus 59.5), and in that case everything is qualified and tax free. These rules are somewhat confusing, so the status of both Roth accounts should be analyzed before combining them, and if they are combined the amount of combined basis should be documented unless the combined Roth is qualified.