IRA TO ROTH
If i convert part of my IRA to ROTH IRA and beneficiary is my adult daughter if i die after 10 years she will inheridate account what are rules for her to empty account ? do i need to keep all records of gains losses dividend etc. does she have to pay income tax on any amount
Permalink Submitted by Alan - IRA critic on Mon, 2024-03-04 19:01
The 10 year rule will apply to her inherited IRAs unless she is disabled. The inherited Roth IRA will have no annual RMDs in years 1-9, but the inherited TIRA will have annual beneficiary RMDs if you pass after your RMDs have begun. The inherited Roth distributions are all tax free if she does not take any distributions until 5 years have passed from the year of your first Roth IRA contribution, so you should keep a record of your first Roth IRA contribution year, and contributions include conversions.
Permalink Submitted by gautam shah on Mon, 2024-03-04 21:15
THANK YOU. I am taking RMD FROM MY IRA for 3 years if i convert IRA TO ROTH after my death say in 10 years my daughter will inheridate ROTH IRA does she pay any taxes on growth? when can she have tax free withdrawal? please clarify
Permalink Submitted by Alan - IRA critic on Mon, 2024-03-04 21:34
Once you have held a Roth IRA for 5 years, all distributions to beneficiaries will be tax free. If you have held a Roth for 3 years, then the beneficiaries need to hold it another 2 years to meet the 5 year requirement for the Roth to be qualified and tax free. However, even prior to the 5 years being met, the beneficiary could withdraw up to the amount of your contributions tax free, but they would need to know the amount of your contributions. For example, if you contributed 300k to your Roth IRA and left 10% to each of 10 beneficiaries, each beneficiary would be able to withdraw 30k (1/10 of 300k) without owing tax until the 5 year period was reached making the entire balance tax free.