Inherited 401k converted to inherited Roth IRA RMDs?
OK, client inherits 401k. They choose to convert that to inherited Roth IRA, paying the taxes due on the full 401k distribution. They now own an inherited Roth IRA. Given the 401k owner was over their RBD, does the beneficiary now have to take RMDs AND clean out the inherited Roth IRA by the end of the 10 years? – m
Permalink Submitted by Alan - IRA critic on Fri, 2022-06-10 15:00
They would have to take annual RMDs only if the plan participant passed after their RBD, but not before. And that would also be the result if the client directly inherited a Roth 401k because a Roth 401k has RMDs and an RBD. However, if the client had inherited a Roth IRA there would be no annual RMDs since a Roth IRA has no RBD or RMDs. In this case client did a Roth rollover to an inherited Roth IRA (which is fairly rare and not as beneficial in some cases due to the 10 year rule). Finally, the proposed Secure Act Regs requiring these annual RMDs for post RBD deaths is generating industry complaints, so at this date we cannot assume that any inherited accounts that are subject to the 10 year rule will require annual RMDs, so client may wish to monitor the final Regs.