Year-of-death RMDs and Roth Conversions: Today’s Slott Report Mailbag

By Andy Ives, CFP®, AIF®
IRA Analyst
Follow Us on Twitter: 
@theslottreport

 

Question:

Both of my parents passed away last year. My mother passed earlier in 2022 and I was able to take her year-of-death RMD out of the inherited IRA before the end of the year. My dad passed in October and once I got the inherited IRA transferred over in December, I forgot to take his year-of-death RMD until January of 2023. What forms will I need to complete to request a waiver, and would this be a good cause for a waiver?

Answer:

Sorry for the loss of your parents. Some good news is that you do not need to request a waiver for missing your dad’s year-of-death RMD. As of last year, the IRS granted an automatic waiver for a missed year-of-death RMD penalty if the RMD is taken by the beneficiary’s tax filing deadline, including extensions. Since you took the RMD in January, the year-of-death RMD has been satisfied, and no forms are needed.

Question:

I converted an IRA to a Roth seven years ago. I want to convert more IRA money to a Roth in 2023. My age is 64. When I convert the additional IRA money to a Roth: 1) Will I need to wait 5 years for this second conversion before I can take out any money? 2) Should I create a new account for the second conversion to keep the second conversion separate from the first conversion done 7 years ago? I’m getting different answers from different financial advisors/CPAs.

Thank you for your help.

Clay

Answer:

Clay,

The definitive answers are this:

1) No, you do not need to wait 5 years on the second conversion to take out any money. The entire balance is immediately available tax- and penalty free, including any earnings. This is because you have had ANY Roth IRA for 5 years AND you are over age 59 ½.

2) No, you do not need to create a second account for the second conversion – unless you want to. Whether you maintain multiple Roth IRAs or not, the IRS does not care. All they see is one consolidated Roth IRA under your name.

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.