Inherited Roth IRA

Submitted by Robert Roselli on Tue, 2023-07-11 13:28

I just encountered my first experience with a client passing away with a Roth.

– Are the rules the same, the account has to be emptied by 2033?
– The decedent didn’t take any RMDs in 2023 prior to their passing. I know the beneficiaries have to take the RMD the decedent didn’t take in 2023 for the TIRA, but not sure if an RMD needs to be processed also for the Roth?



Submitted by Alan - IRA critic on Tue, 2023-07-11 15:31

  • If the beneficiary is an individual, they are either EDBs or subject to the 10 year rule. Most non disabled children of the deceased are subject to the 10 year rule, but there are no annual RMDs in years 1-9.
  • Since a Roth has no RMD for owners, there is no year of death RMD to be completed.
  • Once the Roth has been held 5 years by the deceased and beneficiary combined, it is qualified and completely tax free. Distributions are reported only on line 4a of Form 1040 with no 8606 required. Before the 5 year holding period has been completed, the amount of contributions and conversions come out before any earnings, but if earnings are withdrawn, they are taxable as calculated on Form 8606. Therefore, the beneficiary should first determine if the owner first contributed prior to 2019 and if so the 5 year holding has been completed.

Submitted by Charles Beasley on Wed, 2023-07-19 15:58

In 2022 Inherited Roth from parent who opened it 2 years before death with annual conversions.  I am over 59.5 years old.  I opened my Roth more than 20 years ago.  Does this impact the 5 year period for inherited Roth?  If not can I just wait 3 more years before I take the first distribution from the inherited Roth and have all future distributions tax free?  Thanks

Submitted by David Mertz on Wed, 2023-07-19 17:53

  • Completion of the qualification period for your own Roth IRAs has no bearing on whether or not the qualification period for the inherited Roth IRA has been completed.  In this case, if the parent’s first Roth IRA was opened with a Roth conversion in 2020, the qualification period will not be completed until the end of 2024.  Prior to 2025 amounts up to the conversion basis can be distributed tax free but anything beyond that, the earnings in the Roth IRA, will be taxable.
  • Until then you can leave the money in the inherited Roth IRA to grow eventually tax free.  Since growth will be tax free, it generally would be sensible to leave the money in the inherited Roth IRA until 2032 when the account must be fully drained by the end of that year.  No distributions are required prior to that.

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