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What You Need to Know About Inherited Roth IRAs

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:
  1. The 5-year rule 
  2. The single life rule
If you choose the 5-year rule, you must deplete the Roth IRA by the fifth year after the year of the owner’s death. If you choose the single life expectancy rule (also known as a stretch IRA), the money will be paid to you gradually over your single life expectancy starting the year after the owner’s death if you’re not the owner’s spouse. If you are the owner’s spouse, then you don’t have to start taking distributions until the year your deceased spouse would have turned age 70½.
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the owner made were not tax-deductible, so if you have inherited a Roth IRA, all of the contributions can be withdrawn tax-free. The earnings can also be withdrawn tax-free, as long as the account was held for more than five years (including the time the person you inherited from held the Roth IRA).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


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Thursday's Slott Report Mailbag

Consumers: Send in Your Questions to [email protected]

Can I transfer money from my IRA to my husband's Roth IRA? I am 35, and he is 36.

Thank you!

Gail Clements

No. The only way your IRA funds can be transferred to your husband’s IRA is in a divorce or after your death. Even then, it would have to be transferred to a similar IRA, for example an IRA to IRA or a Roth IRA to another Roth IRA. In this case, you cannot transfer your IRA into your husband’s Roth IRA.