roth beneficiaries

Forum|Forum|3 years ago
July 26, 2023
3 replies
40 views

I have a Roth IRA account in which I have listed my nieces and nephews (all of whom are 30+ years younger than I) as primary beneficiaries. Do my heirs have 10 years or 5 years to liquidate their shares?

Ask the Experts - Retirement - July 2023

Holly W

Level 5

Hello @gwh2

Thank you for joining us today!

When they inherit your Roth IRA, and they are the Designated beneficiary, they will follow the 10-year rule. If they are not the Designated beneficiaries, they will follow the 5-year rule, unless they qualify for the "Eligible designated beneficiary". Here are the requirements:

Spouse or minor child of the deceased account holder
Disabled or chronically ill individual
Individual who is not more than 10 years younger than the IRA owner or plan participant

An eligible designated beneficiary may

Take distributions over the longer of their own life expectancy and the employee's remaining life expectancy, or
Follow the 10-year rule (if the account owner died before that owner's required beginning date)

Designated beneficiary (not an eligible designated beneficiary)

Follow the 10-year rule

Also note that, generally, inherited Roth IRA accounts are subject to the same RMD requirements as inherited traditional IRA accounts. Withdrawals of contributions from an inherited Roth are tax free. Most withdrawals of earnings from an inherited Roth IRA account are also tax-free. However, withdrawals of earnings may be subject to income tax if the Roth account is less than 5-years old at the time of the withdrawal.

I obtained this information from the IRS Website. Here is that link with further Information: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary

I hope this answers your question and happy to answer any follow up questions you may have!

Holly W

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evelynm

Employee Tax Expert

They have 10 years:

Distribution of the account is mandatory for non-spouse designated beneficiaries of inherited ROTH IRAs and you have 10 years to draw down the entire amount.

Have an amazing day. Evelyn M (CPA 20+ years). I would love a thumbs up :) + Mark the post that answers your question by clicking on "Mark as Best Answer".

dmertz

Level 15

They will not be Eligible Designated Beneficiaries (unless disabled or under the age of majority at the time of your death), so they will be subject to the 10-year rule which requires the inherited IRAs to be drained by the end of the 10th year following the year of your death. Because a Roth IRA has no Required Beginning Date for RMDs, no annual beneficiary RMDs are required.