Beneficiary Roth IRA RMD Rules

Submitted by jmemeier on Thu, 2024-01-04 22:32

Am I understanding the Inherited Roth RMD rules correctly that if the owner of the inherited Roth is an EDB they must take annual RMDs for their lifetime but if they are not an EDB they are not subject to annual RMDs from the inherited Roth but would be subject to the 10 year window? If they are an EDB, the table depends on if they are a spouse or not?



Submitted by Alan - IRA critic on Thu, 2024-01-04 22:50

  • Yes, that’s all correct. However, an EDB has the option to opt out of LE payments and into the 10 year rule, but that option is not normally beneficial. And a sole spousal beneficiary would normally elect to assume ownership rather than maintaining the Roth as inherited.
  • Accordingly, a typical non spouse beneficiary under the 10 year rule would be able to leave the inherited Roth untouched in years 1-9, and take the full non taxable distribution in year 10.

Submitted by jmemeier on Thu, 2024-01-04 23:23

Thank you.  If a spouse beneficiary of an IRA elects to assume ownership, then they would not be subject to RMDs during their lifetime, correct?  I’ve not considered the option of a spouse opting out of LE payments for a Roth so thank you for bringing that up.  Under what circumstances might there be an advantage for a spouse to opet out of LE payments in favor of the 10 year rule?

Submitted by Alan - IRA critic on Fri, 2024-01-05 01:44

  • Yes, for Roth IRAs there are no RMDs for owners. But the Secure Act places a time limit on assumption, after which the spouse beneficiary would have to take a distribution and do a 60 day rollover, with any portion of this distribution that is a beneficiary RMD not being eligible for rollover. This new time limit has received very little attention in the financial press. 
  • Since most spouses will complete a spousal rollover of a Roth IRA, the opting out of EDB treatment and into the 10 year rule will probably only be considered for TIRA spouse beneficiaries. This might be advantageous if the beneficiary is quite old and in poor health, and will be leaving the IRA to a charity. Tax bills would be avoided if no distributions were taken and the beneficiary did not survive 10 years. It might also be considered if the beneficiary is in a very high tax bracket presently but will be in a low bracket toward the end of the 10 year rule period. However, if there is a younger beneficiary to be named , that beneficiary would not receive 10 more years, just the remaining time left on the surviving spouse’s 10 year rule.

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