inherited Roth IRA distribution

Submitted by Ron Rahall on Tue, 2015-10-06 13:21

Quick questions:

1) Are RMDs on an inherited ROTH IRA taxable?
2) Are distributions great than RMDs on an inherited ROTH IRA taxable?

thank

ron



Submitted by Alan - IRA critic on Tue, 2015-10-06 17:57

  • Not if the Roth has been held 5 years from the year of decedent’s first contribution. Before the 5 years, RMDs would almost always be tax free as well because the taxable earnings come out last and RMDs are usually a small % of the balance. The 5 years will usually be reached in a couple years if the Roth was not qualified upon date of death.  In other words, before the 5 year period is reached any earnings distributed would be taxable but earnings would probably only be tapped if a very large portion of the Roth was distributed.
  • First thing to do is find out the year of the first contribution to the Roth. If 5 years, then everything is tax free and Form 8606 is not required to report distributions, RMDs or otherwise. If less than 5 years, then beneficiary must determine the balance of regular and conversion contributions in the Roth because that will be needed to complete Form 8606 to report any distributions.
  • Some of the above will vary if the beneficiary is the surviving spouse.

Submitted by Ron Rahall on Wed, 2015-10-07 00:48

thanks

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