Inherited Roth – RMD Rules POST-SECURE ACT
Prior to the Secure Act, beneficiaries of a Roth IRA were subject to annual withdrawals. We are looking for clarification on the Secure Act rules for someone who inherits a Roth IRA as a non-spouse. We were under the impression that there are no annual RMDs due for the beneficiary as the Roth owner will always be treated as if they died before the RBD. With this being said, we’ve kept track of these accounts but haven’t required the beneficiary to withdraw annual RMDs, BUT will have to have the account emptied by 12/31 of the 10th year of the IRA owners death.
Is this accurate information or has is changed?
Permalink Submitted by Alan - IRA critic on Fri, 2025-01-17 16:23
That’s correct. As long as the beneficiary is not an EDB, they are subject to the 10 year rule. If the 10 year rule applies there are no annual RMDs in years 1-9, but the account must be drained in year 10.
If an EDB, then annual RMDs are required every year, but no 10 year rule.
Permalink Submitted by William A Luckey II on Thu, 2025-01-23 11:27
Would you kindly clarify terms of the RMD when the EDB is a minor. The rules were changed with the 2017 Tax Cuts and Job Act, and created some confusion. Also, what happens if the required RMD was missed.
Permalink Submitted by Alan - IRA critic on Thu, 2025-01-23 15:19
When a minor child of a Roth IRA owner inherits, unless they opt out of EDB treatment, they will have to take annual beneficiary RMDs until they reach age 31, as the 10 year rule kicks in at age 21. The final Regs confirm that these annual RMDs do not cease at 21 despite the fact that if the child inherited at 21, there would be no annual RMDs before full distribution at 31.
Your reference to the TCJA likely refers to the kiddie tax. But that’s not likely to be an issue with an inherited Roth IRA because the RMDs will be so small that the distributions would not exceed the Roth basis and therefore would not be taxable. After 5 years from the first year the Roth owner contributed, the Roth would be fully qualified upon their death with the entire balance being non taxable.