Inherited Roth IRA Question
Someone makes their first Roth contribution when they’re 52 years old. At 62, they complete a Roth conversion. I understand the funds converted are then immediately qualified (5 years, over 59.5). If the person dies at 63, does a 40 year old non-spouse beneficiary have to assume a five year rule on the conversion, or does it move to the beneficiary fully qualified?
Permalink Submitted by Alan - IRA critic on Sun, 2021-03-21 18:22
Once a Roth is qualified, it remains qualified for any beneficiaries. The beneficiary has no holding period of any type.
Even if the beneficiary inherited a non qualified Roth there would be no conversion holding period because there are no early withdrawal penalties for inherited accounts. The beneficiary would have to wait until the 5 year holding period starting with the year of the first owner Roth contribution to be completed to be able to distribute earnings tax free however.