Death Benefit on Roth IRA
Hi,
Can you confirm if someone has a variable IRA annuity. The cash surrender vaue is $62,000. The Actual present value is $88k. The death benefit is $148k. They converted this to a Roth IRA this year and then died a week after. I understand the 5 year Roth rule. My question is, will they pay taxes only on the $88k or will the difference between the death benefit and the $88k also be taxable? Thank you.
Permalink Submitted by Alan - IRA critic on Fri, 2022-11-11 23:02
The 88,000 imputed value of the TIRA annuity was apparently calculated using complex rules issued about 15 years ago for conversion of an IRA annuity with death and other fringe benefits. If the decedent had no other Roth IRAs, only the 88,000 of conversion basis will be taxable (if no IRA basis existed) on decedent’s final return. The 88,000 will also be the basis for the Roth beneficiary, and can be distributed by the beneficiary anytime without tax or penalty. Amounts in excess of 88,000 will be taxable to beneficiary if beneficiary does not hold those amounts for 5 years.