Dear Ed Slott,

We appreciate your information. Recently, We sent the following Questions, and received the following answers.

Question 1: If a client inherits a Roth IRA from a parent, already held in an inherited Roth IRA account, do they have to withdraw money, and if so, what are the options for doing so?
Question 2: If the client must withdraw, would it make sense to deposit the money in a personal Roth IRA vs. an inherited IRA?

Answer–

If the parent had already inherited the Roth IRA and then passed, the parent is the designated beneficiary and the client is a successor beneficiary. The client cannot use their own life expectancy for RMDs, but must continue the RMD schedule of the parent. However, instead of simply determining the last divisor used by the parent which might have been incorrect, the client should check back to the year the parent began RMDs and their age at the end of that year. By doing that the client can be sure that the parent’s RMD schedule that client must continue to use is correct. In summar, the client does NOT get a new stretch period because he is only a successor beneficiary and the parent was the desigated beneficiary on whose life expectancy RMDs must continue to be based.

We see that one fact that must be clarified is that the Roth IRA was NEVER inherited by the parent, and the client was the designated beneficiary of the Parent’s Roth IRA. Under these facts, we ask–

Question 3–The client who has inherited the ROTH IRA from parent is in her early 40’s. Is it possible to use the new beneficiary’s single life expectancy or utilize the strechout IRA concept? The inherited Roth IRA is small, but we want to maximze the benefit to the client.

Thanks for your clarification.