Non-Spouse Inheriting 401k with after-tax (non-ROTH) basis
Non-Spouse bene inherited a 401k from her mother in 2019. The 401k has after-tax basis and pre-tax money. RMDs have been coming out as they should. Bene now wants to rollover the inherited 401k. Can the after-tax basis be rolled to a non-spouse inherited ROTH IRA or does the basis need to be accounted for within a non-spouse inherited Traditional IRA?
Permalink Submitted by Alan - IRA critic on Thu, 2023-08-31 20:22
Once the annual RMD has been completed for the year, the beneficiary can request a split direct rollover with pre tax balance to inherited IRA and post tax balance to inherited Roth IRA. There should be no tax due for these rollovers, but the inherited Roth IRA will be subject to the ordering rules for the first 5 years before it becomes qualified, but the basis will come out first, tax free.