Inherited Roth
Sister is 69. Passed away. Brother is 70. He inherits Roth IRA money and is a EDB.
Sister opened Roth in 2023. We did Roth conversions to establish the the Roth IRA. Made contributions (through conversions) in 2023 and 2024. Client passed away in 2025.
How are the RMD’s/beneficiary Roth IRA handled?
Permalink Submitted by Alan - IRA critic on Mon, 2025-03-31 15:08
I am assuming that the brother (EDB) is still living.
Brother must start beneficiary RMDs in 2026 using his age attained in 2026. Although the inherited Roth IRA will not be qualified until 2028, under the Roth ordering rules the conversions come out first tax and penalty free. There will be no tax due for inherited Roth distributions until all the conversion amounts have been distributed, so just taking the RMD will not result in any taxes, and the inherited Roth will be qualified in 2028. All distributions taken before 2028 will have to be reported on Form 8606, which requires knowing the total amount of conversions since this figure must be entered on line 24 of the 8606. I assume there were no regular Roth contributions made.
Although brother also has the option to opt out of EDB treatment and into the 10 year rule, that’s probably not a good option in most cases. If he opted out (deadline end of 2026), there would be no annual RMDs required, but the account would have to be drained by 2035.