The rules that apply to an inherited Roth IRA will depend significantly on who the beneficiary is. That is because, based on the beneficiary, there are distinct rules of distribution looking at a charity to a child or a spouse. The rules of a Roth IRA inheritance however, make it very important for people to be aware of the possible penalties to be associated with not taking a mandated distribution based on age.
While the owner of the IRA is living, no required minimum distributions are required. This is one of the biggest advantages of a Roth IRA. This means that a Roth IRA can build tax free for a very long period of time. When the beneficiary passes away however, the rules change. If the spouse is a beneficiary of their partner’s inherited Roth IRA, they could roll this into a spouse’s name for maximum tax benefits. This means that over the inheriting spouse’s life, there are no required distributions.
However, if the spouse fails to take this action and roll it over into the Roth IRA and instead classifies it as an inherited IRA, required minimum distributions have to begin when that person reaches age 70 and a half. A beneficiary who is a grandchild or a child must withdraw the funds over the course of his or her life. With so many unique tax implications, it is important to set aside time to talk to a talented estate planning lawyer in Pasadena.
