IRA Rollovers and Inherited IRAs: Today's Slott Report Mailbag
By Sarah Brenner, JD
Follow Us on Twitter: @theslottreport
According to the IRS website: Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own (Announcement 2014-15 and Announcement 2014-32). The limit will apply by aggregating all of an individual’s IRAs. Trustee-to-trustee transfers between IRAs are not limited. Rollovers from traditional to Roth IRAs ("conversions") are not limited.
If I am reading this correctly, we can "roll over" (hand carry checks) for multiple IRA accounts, as long as we are rolling over funds to a Roth IRA. Is that correct?
The once-per-year rollover rule causes a lot of confusion. You can only do one 60-day rollover between IRAs of the same type in a 365-day period. This rule applies to your traditional and Roth IRAs in the aggregate. So, if you roll over a distribution from your traditional IRA, you cannot roll over another distribution from any of your IRAs, including your Roth IRAs, for 365 days. Conversions do not count for purposes of this rule. The best advice is not to do 60-day rollovers at all, and instead do direct transfers. This avoids all the complications of the once-per-year rollover rule.
If my son inherits my Roth IRA, I understand he now needs to withdraw the full amount over a 10 year period.
It also appears that any withdrawal by him – whether in year 1, equally over the 10 years, or all in year 10 – is tax free.
What if he decides to take nothing out the first 9 years, and then takes out the full original inherited amount in year 10? If during those 10 years the account increased, can he keep the gains from the Roth IRA, as long as he withdraws the original amount he inherited?
The SECURE Act has raised a lot questions on how distributions to beneficiaries will work going forward. You are correct that you son, if he is not a minor, will be subject to the 10-year rule when he inherits your Roth IRA. You are also right that the 10-year rule does not require annual required minimum distributions (RMDs). If tax-free Roth IRA funds are inherited, it is a good strategy to delay distributions as long as possible and then empty the account in the tenth year following the year of death. The rules, however, are clear. The whole account, including earnings after the Roth IRA owner’s death, and not just the original amount inherited, would need to be distributed by December 31 of the tenth year following the year of death. If this is not done, a 50% penalty would apply to any amount that is not distributed because it would be considered an RMD that was not taken.
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@example.com 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.
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 firstname.lastname@example.org or (516) 536-8282 with any questions.