inherited Roth

[ElNich]

Can I contribute to an inherited Roth?  

[macuser_22]

Only if inherited from a spouse and you choose to treat it as your own Roth and have the IRA custodian transfer it, otherwise NO.

[ElNich]

Thanks for the reply!  Since there are a few "ifs" in your answer, the details are  1) I'm inheriting from my dad.  2) It will be my own.   3) The IRA custodian is transferring it.      But since I'm not a spouse, that's the deal breaker?  I cannot contribute?  Thanks.

[macuser_22]

It can only be transferred to another Inherited Roth IRA that must remain in your dad's name with you as beneficiary.

Thanks to the Secure Act, which was signed into law in December 2019, most (but not all) IRA beneficiaries must deplete an inherited IRA within 10 years of the account owner’s death. This applies to inherited IRAs if the owner died after Dec. 31, 2019.

There is an exception for spouses and minor children under age 18.

[Opus 17 · Accepted solution]

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@ElNich wrote:

Thanks for the reply!  Since there are a few "ifs" in your answer, the details are  1) I'm inheriting from my dad.  2) It will be my own.   3) The IRA custodian is transferring it.      But since I'm not a spouse, that's the deal breaker?  I cannot contribute?  Thanks.

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If you inherited the IRA in 2019, you can't make any contributions.  You have two options for withdrawing the money.  a) withdraw it all within 5 years.  b) stretch it out over your entire lifetime. You will be required to take an RMD (required minimum distribution) each year, which is determined by your age, life expectancy, and the amount of the IRA, but you preserve the balance.  Once you hit age 59-1/2, you can take more if you want.  You can't roll it over or do a trustee to trustee transfer to put it in your own name and escape these rules.  It will always be an inherited IRA treated by these special rules.

If you inherited the IRA after Dec 31, 2019, the SECURE act changed the rules.  You must withdraw all the money by the end of 10 years, but you are not subject to RMDs in the mean time.  You still can't roll it over to your name or make contributions.  

If you are eligible to contribute to a Roth IRA and aren't maxed out yet, you can withdraw money from the inherited IRA and deposit it in your own IRA, but these are treated as two separate transactions each according to their usual rules, as if you were depositing money from your income or other sources. 

Because this is an inherited Roth IRA, the withdrawals are not subject to income tax or the 10% early withdrawal penalty even if you are under age 59-1/2. 

@dmertz  did I miss anything here?

[dmertz · Accepted solution]

As Opus 17 indicated, the Roth IRA that you inherit from your dad will never be your own, it will always be your dad's Roth IRA maintained for you as beneficiary.  This inherited Roth IRA must be maintained entirely separately from your own IRAs.

An inherited IRA can only be moved by non-reportable trustee-to-trustee transfer.  It is not permitted to be moved by distribution and rollover.  Any money paid to you from this inherited Roth IRA can never be rolled over (although the resulting cash can be used to pay for whatever you wish, including using the money to subsidize a new contribution to your own Roth IRA that you are eligible to make.

[ElNich]

You NAILED it, thx.  My dad died a few weeks ago so I'm getting my share of his Roth soon.  But I wondered if I could contribute to it.  Looks like I can't, which is fine, but I'll sit on it for 10 yrs and let it grow.