Spouse inherited Roth RMD options

Submitted by David Rains on Wed, 2018-01-24 22:32

Spouse died in 2009 at age 62 when his wife was 73. He had a converted his traditional IRA to a Roth a few years before he died. The surviving spouse has not treated this Roth as her own IRA. In 2018 the deceased spouse would have been 70.5 and the custodian has identified that an RMD is required. The distribution period from table 1 for the 82 year old wife is 9.1 which means she would have take out about 1/10 of the value of the account. She does not need to take the distributions.

Are there any consequences of not taking the RMD this year and just letting her be the deemed owner of the Roth after the end of the year?
Should she still consider retitling the IRA in her own name after the end of the year or can she do it this year without taking the RMD?



Submitted by Alan - IRA critic on Wed, 2018-01-24 23:27

While not taking a beneficiary RMD in 2018 will result in default to ownership of the inherited Roth, rather than having an inconsistency between the listed title and the default ownership, she should elect to assume ownership of the Roth right away, then have it retitled or rolled over to a new Roth account. There is no 2018 RMD requirement to do this. Her Roth account will be fully qualified and tax free, and there will be no question that her beneficiaries will be designated beneficiaries rather than successor beneficiaries.

Submitted by David Rains on Thu, 2018-01-25 01:57

 Thank you, I was a little woried about the following in PUB 590-B:You cannot make a rollover contribution of your required minimum distributions in years after the owner’s death. Such contribution is subject to the 6% tax on excess contributions.  So originally, I was going to recomend that she wait until next year to rollover this IRA into her own Roth account.Is there a procedure to elect to assume the ownership?If she dies before retitling it would her beneficiaries get stuck with distributions calculated on her life? 

Submitted by Alan - IRA critic on Thu, 2018-01-25 02:26

  • Per IRS Reg 1.408-8, Q 5, in the year the sole surviving spouse elects to assume ownership of the inherited IRA, the RMDs for that year are determined as if the spouse was the owner the entire year. Since this is a Roth IRA, there is no RMD, so and distribution taken is NOT considered an RMD. So she would not be rolling over an RMD. In order not to use up the one permitted rollover, if she wants to change custodians she should do it by a non reportable transfer.
  • The only way her beneficiaries would be treated as successor beneficiaries in this situation would be if she took a beneficiary RMD this year, therefore did not default to ownership status, and then passed after this year. If she passed this year before doing anything, because her first beneficiary RMD does not become delinquent until 2017 ends she is treated as if beneficiary RMDs have not started until the year ends and her beneficiaries would still be treated as designated beneficiaries. These variables can be complex and that is why just electing ownership and having the Roth re titled now is recommended. To do this, she just needs to advise the custodian that she is electing to assume ownership of the inherited Roth.

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