Retirement tax questions

[edited to make corrections]

 

You are not an "eligible" beneficiary so you can't treat the IRA as your own.  It must remain as an inherited IRA and you must withdraw all the funds and close the account within 10 years.  You can rollover the funds to another IRA if you want to use a different broker, but it must always be designated as an inherited IRA.  In addition, the IRS has draft rules that you must take an RMD each year over those 10 years.  You must withdraw at least a minimum amount each year calculated based on your life expectancy (or maybe the life expectancy of your mother, it's complicated), but you can withdraw more.

 

You always withdraw contributions first, conversions second and earnings last.  Contributions are never taxed.  Conversion amounts are not subject to income tax because that was paid when the conversion was made, but conversion amounts are subject to a 10% penalty if they are withdrawn less than 5 years from the date of the conversion.  However, the 10% penalty never applies to the beneficiary of an inherited IRA.

 

Earnings are taxed if the withdrawal is made before age 59-1/2, or if the Roth IRA has been open less than 5 years.  This rule does apply to beneficiaries. 

 

In short, you can withdraw the conversions without tax, but if there are earnings, they will be taxable if withdrawn before 2027.  You may want to ask the plan trustee for the exact amount of the conversion, so you can plan ahead.