Inherited Roth IRA Question
Husband has a Roth IRA (over 59.5, opened longer than 5 years), wife has never owned a Roth. Husband dies. If the wife assumes the account as her own, does she now have to wait 5 years in order for the new gains to be tax-free?
Permalink Submitted by Alan - IRA critic on Tue, 2024-07-30 12:37
These are always tricky. Answer depends on HER age.
When assuming ownership the surviving spouse is entitled to the longer holding period of either spouse but must use the age of the surviving spouse. Therefore, using husband’s holding period she meets the 5 year requirement, but if she herself is not yet 59.5, her Roth IRA will not be qualified until she reaches 59.5. If she took distributions under the ordering rules, the gains would come out last but she would have to report all distributions on Form 8606 including showing the contribution basis. Form 8606 will no longer be needed once her Roth is qualified.
Now, if she were under 59.5 she could maintain the Roth as inherited if she might need to tap earnings, as his Roth was qualified. Beneficiary RMDs would not start until he would have reached RMD age, but all distributions would be non taxable. Once reaching 59.5, she could assume ownership which would stop the RMDs, and her owned Roth would then be qualified (5 years and SHE would be 59.5).