INHERITED ROTH IRA BENEFICIARY RULES AND PAYOUT OPTIONS FOR ELIGIBLE DESIGNATED BENEFICIARIES: TODAY’S SLOTT REPORT MAILBAG

Thursday, December 15, 2022

By Ian Berger, JD
IRA Analyst
Follow Us on Twitter: @theslottreport

Question:

Do adult children who inherited a parent’s Roth IRA in 2020 need to take an RMD each year during the 10-year payout rule or may they leave it alone and deplete the account at the end of the 10th year? I’ve heard it both ways and would like to know which is correct.

Thank you.

Pam

Answer:

Hi Pam,

Beneficiaries of Roth IRAs who are subject to the 10-year payout rule do not have to take annual RMDs during the 10-year period. The requirement to take RMDs within the 10-year period only applies when the IRA owner dies on or after her RMD required beginning date. But Roth IRA owners are not subject to RMDs, so they are always considered to have died before their RMD required beginning date.

Question:

I just inherited both a Roth IRA and a traditional IRA from a friend who was 64 years old at the time of death. I am 60 years old, so I am eligible to use the life expectancy rule for RMDs rather than the SECURE Act’s 10-year rule.

My question is whether I can elect to use the life expectancy rule for the traditional IRA (thus taking required annual RMDs), while at the same time electing to use the 10-year rule for the inherited Roth IRA (taking no annual RMDs on that account, but emptying it within 10 years after the year of death)?

Thanks,

Anthony

Answer:

Hi Anthony,

Yes, you can do that – as long as the IRA custodian allows it. As an eligible designated beneficiary (EDB), you can use the life expectancy rule to stretch out RMDs. But EDBs (with approval of the custodian) can instead choose the 10-year payout if the IRA owner died before his RMD required beginning date, which your friend did. There’s no rule preventing you from choosing one payout rule for the traditional IRA and another for the Roth.

 

Posted in: , , , , ,

Content Citation Guidelines

Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.

Please be advised that prior to distributing re-branded content, you must send a proof to [email protected] for approval.

For white papers/other outflow pieces:

Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC – depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC – depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.

For charts:

Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.

For Slott Report articles:

Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

Please contact Matt Smith at [email protected] or (516) 536-8282 with any questions.