Roth IRA with no beneficiary
I have a client whose 65 year old brother passed away. He had a Roth IRA with no named beneficiary. His will leaves 80% to her and 20% to her daughter. Since the estate is the default beneficiary on the account, are they stuck with the 5 year rule or is there anyway that they can salvage the stretch and base the distributions on their life expectancy? And if that they are stuck with the 5 year rule, do you still open an inherited Roth in each beneficiaries name and divide the account so that they can each manage and distribute their portion as desired? Or is their some other set up that you use when the estate is he beneficiary?
Thanks in advance your help and expertise.
Glenn
Permalink Submitted by Alan - IRA critic on Thu, 2018-02-08 17:36
Yes, the 5 year rule must apply here. The executor can assign the Roth to each will beneficiary in porportion, so each will be able to manage the investments, name their own successor beneficiary and spread out the distributions roughly equally over the 5-6 calendar years in order to control taxes. At least tax rates have been reduced over this period of time with the recent tax bill.