Inherited Roth

Submitted by jmemeier on Fri, 2023-05-12 14:17

No idea why this is so confusing to me. Husband, age 64, died in 2023. Spouse, age 58, is the beneficiary of his Roth IRAs. She would like to take these as a beneficiary IRA to avoid 10% penalty as she will need to access these funds. 1) Confirming she is not subject to RMD, 2) will she be subject to RMD in the bene IRA at any point if she leaves it in the beneficiary IRA and 3) that she can convert it to a spousal IRA after age 59.5 (and how does one go about doing that?)



Submitted by Alan - IRA critic on Fri, 2023-05-12 15:08

  1. As a beneficiary, her RMDs would not start until the year deceased spouse would have reached 73. If husband first contributed to his Roth prior to 2019, meaning that the 5 year holding period has been met, the inherited Roth is qualified and all distributions are tax free.
  2. She can elect to assume ownership of the inherited Roth IRA anytime. If she does, her holding period is the longer of husband’s or her own Roth if she already owns her own Roth. Once the 5 year holding period has been met AND she has reached 59.5, she should elect to assume ownership by advising the custodian of that decision, which is irrevocable. Her Roth will be qualified and completely tax free at that point, and she will not have to be concerned with tracking the Roth basis or using Form 8606. 
  3. Her first job here is to determine where she stands on the 5 year holding period for his Roth because if this has been met, she will not have to determine what his Roth basis is or report on Form 8606. If good records were not kept determining the basis can be challenging.
  4. Yes, the interplay of spousal inherited Roth vs owned Roth tax rules is confusing, so you are not alone.

Submitted by jmemeier on Fri, 2023-05-12 16:05

Thank you!  Regarding the first point “As a beneficiary, her RMDs would not start until the year deceased spouse would have reached 73” – is this a different set of rules as a spouse or does this RMD start date apply to all inherited IRAs and/or Roth IRAs?

Submitted by Alan - IRA critic on Fri, 2023-05-12 16:28

That rule is the same for both sole spousal IRA and Roth IRA beneficiaries, but it does NOT apply to non spouse beneficiaries or to spouses that are not the sole beneficiary.

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