Inherited Roth IRA - Options, Rules, and Required Minimum Distributions

[@MeriBloom-h3w]

Are there any options for keeping the nontaxable benefit of the money inherited from a Roth IRA for a NEDB after the 10 year required withdrawal period? Can beneficiaries roll the money into a new Roth IRA account? If beneficiaries transfer stocks from an inherited Roth IRA to an individual account can the cost basis be reset to the original owner's date of death? If the Roth IRA account has been open for more than 5 years but there have been more recent Roth conversions to this account, is the 5 year waiting period based on the account opening date or the date of the most recent Roth conversion for the NEDB? Thanks much, helpful video, hard to get specifics to be able to inform beneficiaries what to expect and how to handle money once they inherit it.

[@hoss6981]

Great info and video

[@chrisdime]

Appreciate the feedback, thanks!

[@KellyLuff-g8f]

I'm struggling to figure out if I should have been taking RMD's or pulled the funds out within 5 years for an inherited Roth IRA as a spouse. Roth IRA owner/husband passed in 2017 at 39.8. I am currently 46. I did not rollover the inherited Roth. I'm getting confused with what I should have done or should be doing. If I did miss something I want to clear it up with the IRS ASAP. Thanks!

[@chrisdime]

Hi Kelly, I'm sorry to hear that this has been a confusing topic for you. Bottom line is I think you did "miss something" and it would make sense to hire a tax professional for a one-time consult on your options. It appears from the IRS's website (link below) you could have rolled this into: 1) your own Roth IRA (no RMDs nor distributions required) 2) Inherited IRA with RMDs every year 3) Inherited IRA with no RMDs, but would be fully distributed by end of 2022 Unbeknownst to you, it appears you chose option (3) and are "late". That being said, if you would have chosen option (1) then you'd be in the clear so I would see if a tax professional has guidance on how to correct this before you go and distribute this entire account irrevocably. IRS - www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary

[@KellyLuff-g8f]

​@@chrisdimeThank you for the follow up. If I learn anything worth sharing as I resolve this, I will share.

[@chrisdime]

Please do, and also please share which tax professional you hired so we can add them to our rolodex. Thanks!

[@artbaer3122]

If you mentioned children I missed it as far as what beneficiary category they fall into. Assuming I pass and my wife moves my Roth funds into her own Roth account, what happens once she passes as far as our children are concerned? Does my wife have to designate our children as beneficiaries before she passes or what? From your presentation, I assume that the children will have 10 years to empty the remaining Roth account while taking some funds annually from the Roth in years 1-9. Thanks

[@chrisdime]

Great question! Minor children are classified as EDBs, non-minor children are NEDBs. When she passes, if she named the kiddos as beneficiaries, they would get the money without wading through the probate process. If she didn't name them as beneficiaries and simply left the beneficiary designation blank or labeled her "estate" as the beneficiary, then the probate courts will generally split the account between the kiddos (ie. next of kin). No RMDs if they fall into the 10-year rule (NEDB) because Roth IRAs don't have a Required Beginning Date (RBD). However if they are minors they would be considered EDBs and would have RMDs until reaching the age of majority (ie. 18/21). From here it's unclear if they would need to continue RMDs and/or liquidate by the 10th year of being an adult.

[@artbaer3122]

@@chrisdime Thanks Chris. The Roth rules may be clear to you professionals, but us mere mortals need a lot of assistance.

[@TheK9Shepherd]

So I think I follow (maybe) :) I die at 76 so my RMDs from my 401(k) have already started. My wife is 14 years younger and gets my 401(k) when she's 62. I understand that she needs to continue to take MY RMDs through the year I died. But I get confused what my wife needs to do the following year. So her RMDs are calculated based on IRS Life Exp Table. So she'll then be 63 and according to that table it's 24.5 Meaning there is $1mil left in her inherited 401(k), she's required to take a minimum of $40,816 per year BUT has to deplete the entire $1mil in 10 years? Does that sound right? I'll be shocked if I am haha

[@chrisdime]

Assuming you are referring to a Pre-Tax 401(k) and not a Roth 401(k), your spouse is considered an Eligible Designated Beneficiary (EDB) and thus has 2 main options: 1) Continue RMDs based on your life expectancy or hers (Table 1) 2) Roll to her own spousal IRA (no RMDs) Source -> www.irs.gov/retirement-plans/required-minimum-distributions-for-ira-beneficiaries Timestamp 07:34 -> kzbin.info/www/bejne/nZjOnaKql7-CkKc Does that help clarify her options?

[@shaylove5439]

Tfs If you are on disability and Inherited a Roth IRA,are you required to pay taxes to the IRS?

[@chrisdime]

Great question! Whether you are on disability claim or not, distributions from an Inherited Roth IRA (generally) will come out completely tax free. There are times when income taxes may apply to an inherited roth ira and I will link below to that explainer video (timestamp 9:01), I don't think being on disability claim would help you in that regard.