Roth IRA converted in 2001

Submitted by Julie Brangenberg on Thu, 2013-12-26 17:11

Have a customer who converted from a Trad. IRA to a Roth IRA in 2001. He passed away this month, and named his Brother as Beneficiary.

1. If Lump Sum is chosen as dist. option, will the proceeds pass tax free to his Brother?

2. If Decedent IRA is chosen, will brother have to take RMD from Roth & when does it have to begin?

Thanks..

Permalink Submitted by mk foss on Thu, 2013-12-26 19:47

There is no income tax because the Roth has been in place for more than five years.

A lump sum will be take free – but it must be taken within the rules for Roth RMDs to avoid possible penalties.
If the brother chooses life expectancy, the first RMD from the Roth is due before December 31, 2014 with a 2013 death. The minimum amount is based on the brother’s age in 2014 using the Single Life Table. He can always take more than the RMD if he wants.
The other choice is the five-year rule. With that choice, all of the Roth must be withdrawn by December 31, 2018 but there is no specific amount required in each year. A beneficiary who wants a lump sum generally uses the five-year alternative.