Talk:Inheriting a Roth IRA

Reader feedback: What happens if you don't st...
76.188.212.43 posted this comment on 26 December 2013 (view all feedback).

"What happens if you don't start taking RMD's by 12/31 of the year of death? Are there any penalties?"

Any thoughts?

LadyGeek 12:37, 26 December 2013 (CST)

IRS Publication 590 describes when an RMD is required, as well as the penalties for failure to take an RMD when it is required. --LadyGeek 11:28, 26 May 2014 (CDT)

Reader feedback: inheritance taxes on roth ira?
98.189.19.70 posted this comment on 13 February 2014 (view all feedback).

"inheritance taxes on roth ira?"

Any thoughts?

LadyGeek 19:21, 13 February 2014 (CST)

Inheritance taxes are taxes on the estate of the decedent, which is addressed in Estate and inheritance tax. --LadyGeek 11:28, 26 May 2014 (CDT)

Reader feedback: when talking about a roth ir...
12.150.241.194 posted this comment on 20 May 2014 (view all feedback).

"when talking about a roth ira beneficiary in which case the spouse is the sole beneficiary, do not integate other scenarios involving non spouses and what they can do. we need a total segment on just spousal inheritated roth ira's and what choices they have and do not integrate regular ira scenarios."

Any thoughts?

LadyGeek 15:16, 20 May 2014 (CDT)

I requested assistance from Alan S., who gave permission to post this PM (and edit the content) in the wiki. I'll update the article, citing this as a reference.

Pub 590 refers to spousal beneficiaries of a Roth IRA on p 76, however the publication states the inherited Roth IRAs are subject to most of the same rules as an inherited non Roth IRA except as enumerated on p 76.

The main differences for an inherited Roth IRA are: 1) The deceased owner is always treated as passing before their RBD, because there is no RBD for an owned Roth IRA. 2) Taxation rules follow those of owned Roth IRAs in that the 5 year holding period for qualification runs while the owner is alive and continues after his death. The beneficiary therefore needs to know the first year the owner made a Roth contribution.

A sole spousal beneficiary will inherit a fully qualified Roth if the owner first contributed at least 5 years before death. The death of the owner replaces the age 59.5 requirement for the Roth to be qualified. If the spousal beneficiary already owned their own Roth IRA, rolling the inherited one over will enable the 5 year period to be based on the older of the inherited Roth or their own Roth. The sole spousal beneficiary does not need to start RMDs as a beneficiary until the year the deceased spouse would have reached 70.5, should they not roll it over to their own Roth IRA.

Circumstances warranting a spousal beneficiary continuing the inherited Roth status are limited to cases where the Roth has earnings but the surviving spouse is not yet 59.5, and the surviving spouse needs to take a lump sum distribution. In this situation, taking it from the inherited Roth would avoid the 10% penalty on the taxable earnings, while assuming ownership would not.

Not naming a beneficiary or naming the estate as beneficiary of a Roth will subject the estate to the 5 year rule regardless of the age of the owner at death. For a non Roth IRA, this is only true if the owner passed prior to the RBD.

Multiple non spouse beneficiaries can create separate inherited Roth accounts by the end of the year following the year of death just as for non Roth inherited IRAs. This will enable them to each use their own life expectancies for RMDs, since RMDs are required for Roth beneficiaries, but not for owners.

Once an inherited Roth is qualified (5 years from original contribution), it is fully qualified and Form 8606 is not required to report distributions. The gross distributions are entered only on line 15a of Form 1040. For non qualified inherited Roths, the basis from regular contributions and conversions is pro rated according to each beneficiary's % interest.

In a few situations, the Roth agreement will automatically make a sole spousal beneficiary the owner, which will eliminate the inherited Roth option which is rarely beneficial for the surviving spouse. [See comments below --LadyGeek 19:03, 24 May 2014 (CDT)] --LadyGeek 21:31, 21 May 2014 (CDT)

Additional information from Alan S.: The referenced comment comes from How spouse beneficiaries elect to treat inherited IRA assets as their ‘own’., which is authored by Denise Appleby. Based on the low estimate of IRA agreements under which the surviving spouse is deemed the owner are very few (< 5%), this statement can probably be removed from the wiki (it's an outlier). --LadyGeek 19:03, 24 May 2014 (CDT)


 * Further suggested edits from Alan S.: Under "Treat as your own - Spousal rollover"


 * 1) By using a spousal Roth rollover, the surviving spouse can avoid any requirements to withdraw funds from the account. However, one needs to keep in mind that withdrawals of conversions within 5 years and before 59.5 will be subject to the 10% penalty on the taxable portion, and withdrawals of earnings will be subject to both tax and the 10% penalty.


 * 1) (Change to last sentence only) - " If a sole spouse beneficiary opts to maintain the Roth as an inherited Roth, no RMDs are required until the year the deceased spouse would have reached 70.5. Once that year arrives, if the surviving spouse passes, the named successor beneficiaries will have to continue the RMD schedule of that surviving spouse and will not be able to use their own life expectancies.


 * Under Tax factors, 2nd paragraph - 2nd sentence. I see no reason for this sentence and it should be deleted. The opening sentence is sufficient.

--LadyGeek 11:08, 26 May 2014 (CDT)

The article has been revised. --LadyGeek 11:28, 26 May 2014 (CDT)