Inherited Roth IRA Taxation
A client ( 01/31/1968 ) inherits 2 Roth ( Converted ) IRA’s from her mother ( 04/14/1941 ) who passed away in November. The 2 accounts were with two different financial institutions. Roth IRA # 1 was converted over 8 years ago. Roth IRA # 2 was converted just 2 years ago.
I am assuming the 2 accounts will be treated differently based on the 5 year rule? If true, would you advise that the 2 accounts not be commingled?
Permalink Submitted by Alan - IRA critic on Fri, 2022-12-09 20:46
The 5 year period for all Roth IRAs to be qualified has been satisfied by Roth #1, and mother’s death replaces reaching 59.5 for the other requirement. Therefore, both of these inherited Roth IRAs are qualified and tax free. They can combined into a single inherited Roth IRA by direct transfer since they were inherited from the same decedent. There will be no annual beneficiary RMDs required, so client can allow the inherited Roth to accumulate before being drained in 2032.
Permalink Submitted by Richard Ernst on Fri, 2022-12-09 21:11
One last question: Doesn’t the 10 year window start the year after death? Making the depletion of the Roth account December 31, 2033?
Permalink Submitted by Richard Ernst on Fri, 2022-12-09 21:49
Please disregard. You are right…2032