dmertz
Level 15

Retirement tax questions

Remember that Roth IRAs are IRAs, so Roth IRAs are subject to the same RMD rules as are traditional IRAs.  However, because Roth IRAs do not have a Required Beginning Date for the participant to begin RMDs, a Roth IRA participant is always considered to have died before the RBD and the age of the Roth IRA participant is irrelevant to determining RMDs.  The rules for determining RMDs when the participant's dies before RBD are the 5-year rule or the distributions over the life-expectancy of the designated beneficiary, and, if the designated beneficiary is the spouse of the participant, the spouse can roll the money over to their own Roth IRA and avoid beneficiary RMDs altogether.  If the beneficiary is not an individual (such as is the case when the beneficiary is the estate of the decedent), the 5-year rule always applies (because only an individual has a life expectancy).

 

Note that the original question above asked nothing about determining RMDs.  It asked about the taxable amount of a distribution.  Whether or not a distribution to a beneficiary is a qualified distribution is determined only by the amount of time that has elapsed between the beginning of the year for which the participant (grandmother, in this case) first made a Roth IRA contribution and the date of the distribution.  Since more than 5 years had elapsed in this case, the distribution is a qualified distribution.  My previous post was only to point out that in preparing Forms 1099-R some custodians of inherited Roth IRAs don't bother to consider the year for which the participant first made a Roth IRA contribution even if they know it, and use code T exclusively.