Age 75 person dies and leaves his ROTH IRA to children, ages 40 & 41. The ROTH IRA has been established for 15 years+.
RMD Question? I’m thinking they are subject to the ten year distribution rule as the only option.
Presuming that is the case. Account must be emptied within 10 years, is that from date of death or Dec 31 ten years out?
And no requirement to take distributions during years 1-9? And all distributions tax-free?
Thanks
Matt
That was bad advice. A non spouse beneficiary can never roll over a distribution from an inherited IRA. If the beneficiary needs funds, they should withdraw only the amount of funds needed at the time, since funds cannot be returned. There is no limit to the number of distributions, however.
If a beneficiary made this mistake and was stuck with a taxable distribution they did not need, they might increase contributions to their own employer plan if not already maxing them out. This will offset the tax due, continue tax deferral, and result in RMDs being delayed much longer and then subject to the lower RMD amounts of an owner compared to a beneficiary.
Permalink Submitted by Alan - IRA critic on Wed, 2021-08-04 17:45
Unless disabled, the 10 year rule applies, and because the inherited Roth will generate tax free gains and the entire balance will be non taxable, it is best to wait until the last year to distribute it. There are no annual RMDs until the final year, and the deadline for full distribution is 12/31 of the 10th full year after the year of death. Therefore, for a death in 2021, the inherited Roth most be drained by 12/31/2031.
Permalink Submitted by Matt Mason on Wed, 2021-08-04 18:00
I had another advisor advise them to take a check for the full distribution from this inherited IRA, use the funds they would need and then 60-day rollover the funds they werent’ planning to use back into an inherited IRA. I told them to be very leary of that. Can you do a 60-day rollover for inherited funds in this case(non-spousal)?