What Happens When You Inherit a Roth IRA?

What happens when you inherit a Roth IRA

Due to recent law changes, specific rules now apply to beneficiaries of an inherited Roth IRA. You should consult with a financial advisor regarding specifics that apply to you and your situation.

Surviving spouses may treat an inherited account as their own and avoid required minimum distributions by stretching withdrawals over their lifespan. Other beneficiaries must adhere to a schedule of RMDs according to their age and must use up the account within 10 years.


Distribution details vary depending on whether or not the deceased was a spouse, what type of account (traditional or Roth), and when their original account owner passed away. In general, surviving spouses are allowed to treat an IRA as their own and take RMDs or follow the 10-year distribution rule.

The 10-year rule requires beneficiaries of an inherited IRA to withdraw its contents within 10 years; otherwise they face a 50% penalty fee.

Eligible beneficiaries may use the Single Life Expectancy table to manage their distributions more carefully and reduce penalties while taking advantage of tax-free growth for up to ten years in their IRA account. A lump sum distribution may be best from a financial viewpoint if your account is substantial, however. Inheritors also have the option of converting their inheritance to Roth, though there may be complications which should be discussed with a tax professional first; depending on their tax rate this might make more sense than spreading out their payments over multiple lifetimes.


Tax considerations of inherited Roth accounts are of particular concern; withdrawals are generally taxed as ordinary income upon withdrawals; this includes withdrawals made from investment earnings within these accounts.

Non-spouse beneficiaries must liquidate an inherited Roth IRA by December 31 of the 10th year following its owner’s death, per an inherited retirement law that went into effect in 2020. Prior to this law’s implementation, heirs could “stretch out” distributions over their lifetimes depending on its growth potential.

Under this new rule, required minimum distributions (RMDs) based on your life expectancy will need to be taken in years one through nine and finished off by year ten, ultimately leading to depletion of your account by its closing. These RMDs could bring you into higher tax brackets depending on your income level; non-spouse beneficiaries might want to consider setting up trusts with an inherited Roth IRA structure as an investment option in such circumstances.


Government bodies and legislation, such as the SECURE Act, set forth rules for inheriting an IRA that vary depending on your relationship to its original account holder, their year of death, whether they began taking required minimum distributions before their passing and whether or not theirs is a Roth or traditional account.

Inherited IRAs typically require their heirs to empty them within 10 years of inheriting, although there may be exceptions depending on your relationship and year of the deceased’s death. If you’re married, however, assets can be moved over into an IRA in your name so as to treat them like they were always yours while paying taxes at ordinary income rates and avoiding incurring penalties of 10% should earnings be withdrawn before age 59 1/2.

Spouses may use a method known as the “stretch” distribution strategy, calculated based on life expectancy. You should carefully consider any tax implications of mixing inherited funds with non-inherited ones in calculating RMDs.


Spouses who inherit an IRA can transfer it into their own accounts and manage it as though it were theirs, with annual distributions over their life expectancies or those of the deceased owner’s remaining years of life.

Non-spouse beneficiaries cannot avail themselves of this strategy: They must withdraw all tax-free funds within 10 years.

Spouses of deceased spouses may opt for the “stretch” method of withdrawals, which allows them to spread withdrawals out over their life expectancies or that of their deceased partner’s. They must know how long the original account holder had an IRA account and at what age they died.

Beneficiaries who inherit traditional IRAs must start taking Required Minimum Distributions in the year following the original account holder’s death or risk incurring penalties from the IRS. When making distribution decisions, beneficiaries should always consult a tax professional as this will help make sure they’re making informed choices.

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