Beneficiary Roth IRA distributions

Submitted by bill chamberlin on Thu, 2023-12-21 14:30

I’m getting conflicting interpretations (elsewhere) w/r/t the Required Annual Distribution (if any) in a Beneficiary Roth IRA.
The current owner is NOT a Designated Beneficiary (deceased’s daughter). Date of Death was 6/12/2020. Everyone agrees the account has to be depleted by 12/31 of the 10th year following the owner’s death (12/31/31) but there is not a concensus about the requirement to take Annual Distributions. Can you please give an answer in English and also cite IRS code section(s)?

Also, as the original owner held the Roth IRA for more than 5 years, I’d like to confirm that distributions from said Beneficiary Roth IRA will be (income) taxable to the extent of any appreciation of internal assets subsequent to the date of inheritance. A brief review of the Order of Distribution would be welcomed. (Gain extracted first? etc.)



Submitted by Alan - IRA critic on Thu, 2023-12-21 16:20

  • Because all Roth owners are treated as passing prior to their RBD (because there is no RBD), 10 year rule beneficiaries are not required to take annual RMDs in years 1-9. For an owner death in 2020, the inherited Roth must be drained by the end of 2030. The inherited Roth is qualified now (5 years and owner deceased) and all distributions will be non taxable and only reported on line 4a of Form 1040. Since the Roth is qualified, there is no ordering rule to apply to distributions and no need for Form 8606. The following is copied from the proposed Secure Act Reg, addressing deaths prior to the RBD:
  • “Section 401(a)(9)(H)(i) provides for a new 10-year distribution period in certain cases (10-year rule). Specifically, in the case of a defined contribution plan, if an employee who has a designated beneficiary dies before the employee’s required beginning date, then section 401(a)(9)(B)(ii) is satisfied if the employee’s entire interest is distributed by the end of the calendar year that includes the tenth anniversary of the employee’s death. This 10-year rule is similar to the 5-year rule in the existing regulations (under which distributions may be delayed until the end of the fifth calendar year following the calendar year of the employee’s death if the employee dies before the required beginning date) and permits distributions to be delayed until the end of the tenth calendar year following the calendar year of the employee’s death if the employee dies before the required beginning date. “

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