ROth inhertied question
This may be a repeat but i looked through the threads and just couldnt find the answer….
Client dies with a ROTH IRA in 2016. 3 beneficiaries are kids. THe lifetime stretch was never opted for and the account was split into 3 inherited ROTH IRAs around 2019.
My understanding is that since there were no distributions done at all- the final date for the funds to come out would have been 12/2021. 2017/2018/2019/2020/2021
I also understood that because of the 2020 RMD waive due to Covid – that could have been pushed out until 2022 which is now.
Do i have that right?
Permalink Submitted by Alan - IRA critic on Thu, 2022-12-22 15:19
Yes, that is corrrct. 2020 is not counted as part of the 5 year rule. However, most IRA contracts apply life expectancy as the default method. A beneficiary in this situation could probably calculate the 2017-2019 and 2021-2022 beneficiary RMDs, take the full distribution, and then file Form 5329 for the first 4 of those years to request the penalty waiver. While all distributions are now qualfied and tax free, doing this would preserve the tax free gain generation for more years. This decision would be based on the amount of these accounts, beneficiary need for funds, and their ages. Note that the annual RMD divisors will be the same for all of them, based on the age of the oldest beneficiary because separate accounts were not created by the end of 2017 deadline.