Spousal Inherited Roth IRA
In the case that a Roth IRA owner dies and leaves it to a spouse, the spouse can treat the Roth as his/her own, correct? No distributions have to be made if they are a sole beneficiary.
If a spouse is not a sole beneficiary, how does an inherited Roth get treated?
Permalink Submitted by Alan - IRA critic on Wed, 2020-06-24 17:19
Yes, the sole surviving spouse beneficiary can elect to assume ownership of the Roth and it will be treated as if it was their own all along, therefore their 5 year holding requirement would start with the first contribution of either spouse. If not a sole beneficiary the spouse can still transfer their interest to their own Roth IRA. That would avoid any inherited Roth RMDs. In certain situations the spouse may choose to maintain the Roth as inherited, such as when they need distributions coming from recent conversions by the decedent. Taking beneficiary distributions of those conversion would waive the 10% penalty since the distribution is a beneficiary distribution. But in most cases, the spousal rollover works better.
Permalink Submitted by Scott Goldman on Mon, 2020-10-05 16:51
is this treated the same as the inherited IRA where the non-beneficary has up to 10 years to empty?
Permalink Submitted by Alan - IRA critic on Mon, 2020-10-05 21:17
No, a surviving spouse is automatically an eligible designated beneficiary, who can use their life expectancy for RMDs instead of the 10 year rule. Depending on the age of the SS including their age in relation to the deceased spouse, remaining as beneficiary could produce a longer or shorter distribution period than 10 years. A young surviving spouse would have many years to take beneficiary distributions. But in most cases, once the surviving spouse reaches 59.5, they are better off to elect ownership of the inherited IRA, or if they are not the sole beneficiary to do the spousal rollover of their shares to an owned IRA.