Will the spouse pay tax on an inherited Roth IRA distribution?

Submitted by Amanda Minter on Tue, 2022-11-01 16:31

I have a female client that rolled $46,546.91 from her ROTH 401(k) to a ROTH account on 1/19/2017. Then she did ROTH conversions of $220,000 on 12/17/20 and another ROTH conversion of $149,439.60 on 12/21/21. This client passed away on 1/30/22 at the age of 64.

Her husband, age 66 was the sole beneficiary on the account. He decided to roll the assets into his own Roth IRA. His Roth was opened in July 2022 and her assets were rolled into the account in July as well. He also did a ROTH conversion of $200,872.00 on 7/29/22.

He would like to take a $200k distribution. How will the distribution be treated as far as tax and penalties?

The total ROTH IRA account balance right now is: $589,146.71, so if he did take a distribution now it would be at a loss.



Submitted by Alan - IRA critic on Tue, 2022-11-01 18:02

  • When the surviving spouse rolls over a Roth IRA inherited from a deceased spouse, the holding period is the longer of each of their Roth IRAs, but his own age applies to distributions. Since the deceased spouse contributed by rollover to a Roth IRA in 2017, the 5 year holding period has been completed, and the surviving spouse is over 59.5. Therefore, the Roth IRA is qualified all distributions are tax and penalty free. They only need to be reported on Form 1040, line 4a. Form 8606 is not needed.
  • The end result of a 200k Roth distribution is about the same as if he just took a taxable distribution from his IRA in the first place instead of converting. What was the point of the conversion? At least his marginal tax rate will probably be lower in 2022 than in future years since this is the last year he can file jointly unless he remarries.

Submitted by Amanda Minter on Tue, 2022-11-01 21:14

if the Roth IRA is qualified based on her initial rollover in 2017 and he is older than 59.5, why would the $200k distribution be taxable?  All this money is in one ROTH IRA account at this time and her rollover is more than the $200k?  

Submitted by Amanda Minter on Tue, 2022-11-01 21:36

We just needed to read your response a few times.  we understand.  Thank you.

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