Non-spouse beneficiaries are required to eventually take Required Minimum Distributions (RMDs) from an inherited Roth IRA, and the amount and payout period, after the IRA holder s death, depends on who is designated as the IRA beneficiary(ies) and their age at the time of the IRA holder s death.
Inheriting a Roth IRA. If you inherit a Roth IRA and transfer the assets to an Inherited Roth IRA, unlike the original owner, you must take MRDs. As long as the assets have been in the Roth IRA for five or more years, these MRDs can be withdrawn federally tax-free. 1 Automatically calculate the MRD you need to withdraw from your Inherited IRA assets each year. 2  Direct those distributions to you, your bank account, or into a Fidelity nonretirement account that you specify. 3  Notify you annually each January of your MRD amount and schedule for the year. Roth IRAs are not subject to the lifetime Required Minimum Distribution rules since no distributions are required during the lifetime of the owner. However, Roth IRAs are subject to Required Minimum Distributions rules after the death of the owner of the Roth IRA with a 50% penalty if such distributions are not made. The answer is that if you have a Traditional IRA or if you are considering converting a Traditional IRA to a Roth IRA, you will still need to be concerned about the Required Minimum Distributions rules. Non-spouse beneficiary. If you inherit a Roth IRA from someone other than your spouse, you aren’t permitted to make contributions to the inherited IRA or combine it with any Roth IRA you established for yourself. What’s more, you have to follow the minimum distribution rules for inherited IRAs. As a result, a beneficiary may have to pay tax on earnings withdrawals if the original owner’s death and the beneficiary’s withdrawal both occur shortly after the Roth IRA is established. This result isn’t as harsh as it may seem, however. If you inherit a Roth IRA and roll over to an Inherited Roth IRA, you must take MRDs (unlike the original owner, who was exempt from MRDs during their lifetime). The assets must be moved to an inherited IRA and the same rules apply for separating the assets as when there are multiple beneficiaries. 1 Automatically calculate the MRD you need to withdraw from your Inherited IRA assets each year. 2  Direct those distributions to you, your bank account, or into a Fidelity nonretirement account that you specify. 3  Notify you annually each January of your MRD amount and schedule for the year. A Roth IRA is an IRA that, except as explained below, is subject to the rules that apply to a traditional IRA. You cannot deduct contributions to a Roth IRA. If you satisfy the requirements, qualified distributions are tax-free. You can make contributions to your Roth IRA after you reach age 70 ½. You can leave amounts in your Roth IRA as long as you live. The account or annuity must be designated as a Roth IRA when it is set up. Non-spouse beneficiaries are required to eventually take Required Minimum Distributions (RMDs) from an inherited Roth IRA, and the amount and payout period, after the IRA holder s death, depends on who is designated as the IRA beneficiary(ies) and their age at the time of the IRA holder s death. The following chart may be used to determine inherited Roth IRA Required Minimum Distribution options. Note that a beneficiary s age as of December 31 of the year of distribution is used to determine the life expectancy (LE) factor for RMDs. For one thing, the estate tax applies to assets you own in a Roth IRA the same way it applies to assets you own in a regular IRA. What’s more, if you die less than five years after setting up a Roth IRA, your beneficiaries may have to pay tax on earnings if they withdraw them too soon. As a result, a beneficiary may have to pay tax on earnings withdrawals if the original owner’s death and the beneficiary’s withdrawal both occur shortly after the Roth IRA is established. This result isn’t as harsh as it may seem, however. 1 Generally, you must take distributions during your lifetime or within five years after the original account holder passed away. 2  With an Inherited Traditional IRA, you’ll pay taxes on any distributions you take. 3  Rollover, SEP, and SIMPLE IRAs become Inherited Traditional IRAs. Inherited IRA distribution rules: 1  Generally, you must take distributions during your lifetime or within five years after the original account holder passed away. Example: You inherit a Roth IRA that was established two years earlier. The Roth IRA includes $96,000 from a rollover contribution and $4,000 of earnings. You can immediately withdraw the entire $100,000 and pay tax (but no penalty) on the $4,000 of earnings. As a result, a beneficiary may have to pay tax on earnings withdrawals if the original owner’s death and the beneficiary’s withdrawal both occur shortly after the Roth IRA is established. This result isn’t as harsh as it may seem, however.
https://www.fidelity.com/retirement-planning/learn-about-iras/inherited-ira-mrd http://www.rothira.com/roth-ira-required-minimum-distribution-rmd http://fairmark.com/retirement/roth-accounts/roth-distributions/inherited-roth-ira/ https://www.fidelity.com/retirement-planning/learn-about-iras/inherited-ira-mrd https://www.irs.gov/retirement-plans/roth-iras http://www.rollover.net/Inherited-Roth-IRA-Stretch-IRA.htm http://fairmark.com/retirement/roth-accounts/roth-distributions/inherited-roth-ira/ http://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/inherited_ira/withdrawal_rules http://fairmark.com/retirement/roth-accounts/roth-distributions/inherited-roth-ira/
distributions from inherited roth ira