Inherited IRA

Posts Tagged ‘roth ira’

An inherited Roth IRA works similar to Inherited Traditional IRA with some specific Roth IRA rules apply.

What is an inherited Roth IRA?

The term inherited Roth IRA is used for accounts when the Roth IRA owner has passed away and the IRA Beneficiary has not distributed all of the Roth IRA assets.

The registration or plating on this type of account will still include the original Roth IRA owner’s name, plus the name of the inherited IRA Beneficiary.

Example: John Doe (DECD) FBO Mary Doe (BENE).

Required Death Distributions of inherited Roth IRA & tax treatments

The IRA Beneficiary will take the Required Death Distributions from this type of account and it will be reported on IRS Form 1099-R, under the IRA Beneficiary’s Social Security Number.

Rename Inherited IRA – tax implications

If the surviving spouse IRA Beneficiary is under age 59 �, the spouse should consider keeping the Roth Inherited IRA in the decedent’ s name as an IRA Beneficiary Roth IRA. This is of particular importance if the spouse will need distributions before age 59 �. By keeping the assets in a beneficiary IRA, any distribution may be subject to income tax, but not the 10% penalty.

Inherited IRA rollover & tax penalty

When the surviving spouse IRA Beneficiary reaches age 59 �, the inherited Roth IRA can be rolled into the survivor’s inherited rollover IRA. This is called the Inherited IRA rollover. If the surviving spouse rolled over the Roth IRA and then needed a distribution before age 59 �, the 10% penalty tax would be imposed, unless another exemption applies.