Inherited Roth IRA

Submitted by Stephen Hodson on Tue, 2020-09-29 19:36

My client is a 72 yr old female who lost her husband 8 years ago. She is the beneficiary of his Roth IRAs that total about $30,000.

Her advisor at another firm did not explain that she would have to do RMDs. Question 1: Where in the code does it say the beneficiary has to do rmds? Question 2: Are there any penalties for missing the rmds? Thanks



Submitted by David Mertz on Tue, 2020-09-29 22:42

  • Section 408(a)(6) specifies that rules similar to those in section 401(a)(9) apply to IRAs.  Since Roth IRAs do not have a required beginning date for the owner to begin distribution, the rules in section 401(a)(9) for the participant dying before RBD apply.
  • Under the circumstances, since she is the spouse of the decedent the special rule in CFR 1.408-8 Q&A-5(b)(1) has resulted in the client becoming the owner by default for failing to take the RMDs required as beneficiary, despite the account title still showing it as an inherited account.  As a result there are no missed RMDs because, as owner, she has no RMDs.  The inherited Roth IRA simply needs to be retitled to show her as owner or trustee-to-trustee transferred to her own Roth IRA.
  • Since there is rarely a reason for a spouse beneficiary to maintain a Roth IRA as inherited, many Roth IRA agreements automatically transfer to an owned Roth IRA any Roth IRA inherited by a spouse.  Some agreements do not, though.

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