Inherited Roth IRA

Today TaxMama hears from Oscar in Michigan who has this question. “I am 85 years old and have named my son as the beneficiary of my Roth IRA account. Must he be 59 ½ years old before he can access this account. “

Dear Oscar,

When you ultimately die, your son will inherit your Roth IRA, as your beneficiary.

At that time, he can draw the money tax-free, without a problem.

That is one of the few retirement accounts that’s worth having a large balance in at death, for tax purposes.

One thing to note though:
“Beneficiaries can withdraw earnings tax-free, even if the beneficiary is under 59½ and the decedent was under 59½ but only if the five-year requirement is satisfied. ”

So, the Roth has to have been established for at least 5 years before your son may draw money tax-free.

If he draws money before that, he may draw from the principal (your contributions) without paying tax. He’ll only have to pay tax on the earnings. Regardless, as a decedent’s Roth IRA, there are no early withdrawal penalties – just tax.

There’s a good overview at the Fairmark Press site about inheriting Roth IRAs:

http://www.fairmark.com/rothira/inherit.htm

And remember, you’ll find answers to lots of questions, about Roth IRAs and other tax information, free. Where? At TaxMama.com

[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips. Please click on the subscribe link and join us.]

File Download (0:00 min / 0 MB)

Leave a Reply