17 Mar Do you have to take distributions from an inherited Roth IRA?

Q. My understanding is that my heir to a traditional IRA can keep it for up to 10 years, and not be required to take annual Required Minimum Distributions (RMDs). Is the rule the same for an inherited Roth IRA?
— Planning

A. We’re glad you’re asking.

The rules are different for Roth IRAs.

“A non-spousal beneficiary of an inherited Roth IRA must take RMDs,” said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston. “As long as the assets have been in the Roth IRA for five or more years, these RMDs can be withdrawn federally tax-free.”

The beneficiary will not be subject to the 10% early withdrawal penalty, he said.

“The assets can continue to grow tax-free and the beneficiary can withdraw at any time,” he said. “However, the beneficiary of an inherited Roth IRA must liquidate the entire value by Dec. 31 of the year containing the fifth anniversary of the owner’s death.”

As a caveat, under the five-year rule, no RMDs are required during the five-year period, he said.

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This story was originally published March 17, 2021.

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