Spouse Bene Roth IRA
The husband passes away and leaves his Roth IRA to his wife.
She opens a beneficiary Roth IRA instead of moving it to a Roth IRA in her name.
Questions
1) Does she still need to take out RMDs? I am assuming yes.
2)Can she move the funds from the Bene Roth IRA to a Roth IRA in her name?
Permalink Submitted by Alan - IRA critic on Tue, 2021-12-14 20:02
Yes, however as a sole spousal beneficiary, her beneficiary RMDs would not begin until deceased spouse would have reached 72. If she were to elect to assume ownership of the Roth, she would be treated as the owner the entire year, and there would be no RMDs for that year or beyond.
Yes, anytime. However, if she is not yet 59.5 her owned Roth would not be qualified. Any distributions of taxable conversions under 5 years would be subject to penalty, and any distribution of Roth earnings under the ordering rules would be subject to both tax and penalty.
Conversely, if she maitained the Roth as inherited for a time, there would be no penalty in play, and once 5 years passed from husband’s first Roth contribution, beneficiary Roth distributions would be qualified and tax free since his death would be substituted for the age 59.5 requirement for qualification. She could then assume ownership upon reaching 59.5 after 5 years from his first Roth contribution OR 5 years from her own first Roth contribution has passed. This holding period is the longer of either spouse’s first Roth contribution.
As you can see, spousal inherited Roths have a number of complexities in determining when best to elect to assume ownership of the inherited account without knowing if/when distributions will be needed.