Inherited IRA

Posts Tagged ‘distributions’

Important Points About Required Death Distributions

• When a Roth IRA owner names any person or entity (other than the estate) as IRA Beneficiary, the Roth IRA avoids estate probate proceedings;

however, avoiding probate does not mean the Roth IRA necessarily avoids estate taxes. 

The value of a decedent’s Roth IRA is included in the estate for estate tax purposes. 

However, any Roth IRA assets for which a surviving spouse or charitable organization are the beneficiaries will be eligible for exclusion from the taxable estate. 

• Distributions from the decedent’s Roth IRA are not subject to the 10% premature distribution penalty, even if the spouse or Non-Spouse Beneficiary has not turned age 59 �, but may be subject to ordinary income taxes.

• If the beneficiary decides to change the institution where the decedent’s IRA account is being held, a direct transfer can occur to move the decedent’s IRA from one institution to another, as long as the new institution accepts it.

The Roth IRA at the new institution may remain in the name of the decedent, for the benefit of the IRA Beneficiary. This transfer is not, by itself, a taxable event. 

Specific for Spouse IRA Beneficiary

• If the spouse is the sole primary IRA Beneficiary, the Roth IRA will avoid federal estate taxes because it qualifies for the unlimited marital deduction.
• The surviving spouse only has the option to roll the Roth IRA into his or her name alone if he or she is the sole primary beneficiary.