When a Roth IRA owner dies, the money belongs to the beneficiary. Although Roth IRA owners never have to take minimum distributions during their lifetime, the beneficiary must take distributions after the Roth IRA owner dies. Roth IRA beneficiaries have the same after-death stretch opportunity as if they inherited a traditional IRA. The only difference is that RMDs (required minimum distributions) from an inherited Roth IRA will generally be tax-free.
There are two options for you as the beneficiary of a Roth IRA:
- The 5-year rule
- The single life rule
Choosing the single life expectancy option will allow the inherited Roth IRA to last longer and continue to grow tax free for you.
If you are the spouse beneficiary, you have a third choice that a non-spouse beneficiary doesn’t have; you can simply make the Roth IRA your own and never have to take distributions.
All Roth IRA contributions the owner made were not tax-deductible, so if you have inherited a Roth IRA, all of the contributions can be withdrawn tax-free. The earnings can also be withdrawn tax-free, as long as the account was held for more than five years (including the time the person you inherited from held the Roth IRA).
-By Joe Cicchinelli and Jared Trexler
0 comments:
Post a Comment