Inheriting spouse's IRA - I'm under 59 1/2 years old, accounts over 5 years

[dmertz]

For IRAs inherited from a decedent who had not yet reached their RBD, the IRS allows an EDB to opt into the 10-year rule to eliminate the possibility that had they been a non-EDB under they would be in a better position under the 10-year rule in some circumstances.

Because a Roth IRA has no RBD, the participant in a Roth IRA is deemed to always die before their RBD, giving EBDs the option to elect the 10-year rule by the end of the 9th year.  There is no formal election process for applying the 10-year rule under these circumstances, the EBD just needs to empty the account by the end of the 10th year if they've made this election.  An EDB who is an EBD due to being the surviving spouse can assume ownership prior to the 10th year and avoid RMDs altogether while still having access to earnings in the Roth IRA without penalty (and without tax if the 5-year qualification period has been met) in earlier years.

Note that if the spouse beneficiary fails to complete an annual beneficiary RMD under life-expectancy distributions, they would normally be deemed to be the owner of the IRA.  However, with the option to elect the 10-year rule, "failure" to complete an annual beneficiary RMD from the Roth IRA could just mean that they elected the 10-year rule with no annual RMDs required prior to year 10 when the entire remaining balance would become an RMD.

[fanfare]

Therefore,

A surviving spouse doesn't have to take RMDs on an IInherited Roth IRA.

@dmertz 

The first sentence in your reply above has problems.

[dmertz]

@fanfare , I don't understand.  Only if the surviving spouse chooses to treat the inherited IRA as their own do they avoid eventually having to take RMDs.  If the surviving spouse maintains the inherited IRA as beneficiary, the proposed rules say that the surviving spouse must begin RMDs the year the deceased spouse would have reached their RBD, which in this case has already happened.

[Opus 17]

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@fanfare wrote:

Therefore,

A surviving spouse doesn't have to take RMDs on an IInherited Roth IRA.

@dmertz 

The first sentence in your reply above has problems.

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@fanfare ,

There are new rules for inherited IRAs that are being promulgated as a result of changes in the SECURE act.  One of the rules is that inherited IRAs are subject to RMDs, including inherited Roth IRAs.  These rules are still "proposed" and have not been adopted as final, so they are not written in publication 590-B, but there is no reason to think they won't be made final.

The RMD requirement is separate from the 10 year rule.  So a non-qualified beneficiary must follow the 10 year rule and take RMDs until then.  A qualified (spouse) beneficiary does not have to follow the 10 year rule, and can choose to either keep the IRA as "inherited" or assume ownership in their own name.  If they keep the IRA designated as "inherited", there may be advantages (no 10% penalty before age 59-1/2, for example), but they also have to take RMDs.