If you’re a Roth IRA beneficiary, your options vary depending on whether you inherit it as a spouse or as a non-spouse. Here’s a rundown of the options for each situation. You have four options if you inherit a Roth IRA as a spouse: With a spousal transfer, you treat the Roth IRA as your own.
What happens to the money in a Roth IRA when the owner dies?
If you choose this option, all the assets in the Roth IRA are distributed to you. There’s no tax on contributions in the account. But the earnings are taxable if the account was less than five years old when the original account owner died.
What are the rules for beneficiary of a Roth IRA?
With the Life Expectancy option, the assets are transferred into an Inherited Roth IRA in your name. You’ll be subject to required minimum distributions that must begin by Dec. 31 of the year following the year of death. Distributions are spread over your life expectancy if you’re the sole beneficiary.
When do I have to withdraw from my inherited Roth IRA?
Under the Five-Year Method, the assets are transferred to an Inherited Roth IRA in your name. You can spread out the distributions, but you must withdraw all the assets from the account by Dec. 31 of the fifth year following the year of death 6 6
Can a inherited IRA be split between siblings?
When an inherited IRA is split between siblings, it is important to understand the IRA transfer rules. The custodian of the IRA should be able to transfer the funds to separate IRAs that the siblings have set up with themselves as the beneficiaries.
What are the options for inheriting a Roth IRA?
You have three options if you inherit a Roth IRA as a non-spouse: Option 1: Open an Inherited IRA, Life Expectancy Method With the Life Expectancy option, the assets are transferred into an Inherited Roth IRA in your name. You’ll be subject to required minimum distributions that must begin by Dec. 31 of the year following the year of death. 6
Can you roll over an inherited IRA into your own IRA?
When you inherit an IRA from your spouse, you have a choice to make that other inheritors don’t: you can roll over the assets into your own IRA. You can also transfer the assets into an Inherited IRA, as all other beneficiaries can. Depending on which option you choose, different RMD rules apply.
