As a beneficiary of a Roth IRA, your rel🐈ationship to the original owner and the age of the account determine which options you have to manage the funds being transferred to you.

The rules regarding inheriting Roth IRAs and other retirement accounts have changed since the passage of the Setting Every Community Up for Retirement Enhancem🐽ent (SEC෴URE) Act 𝔍in 2019, particꦇularly those for non-spousal heirs.

Estate Planning with Roth IRAs

Roth IRAs are valuable estate-planning tools for account holders. As an owner, all distributions that you take in retirement are tax-free. Additionally, you can keep your money in a Roth IRA to grow and pass it on to your heirs. Unlike a 澳洲幸运5官方开奖结果体彩网:traditional IRA, a Roth IRA doesn't have a provision for 澳洲幸运5官方开奖结果体彩网:required minimum distrib🐼utions (RMDs) at age 73.

An 澳洲幸运5官方开奖结果体彩网:inherited Roth IRA once provided benefits for a lifetime to beneficiaries. Under the rules of the 澳洲幸运5官方开奖结果体彩网:SECURE Act and 澳洲幸运5官方开奖结果体彩网:SECURE Act 2.0, only spouses, minor children of꧋ the deceased, those who are disabled or chronically ill, and those who aren't more than 10 years younger than the deceased, such as a sibling, can hold inherited funds in a Roth IRA account longer than 10 years.

Non-qualifying heirs who inherit a Roth IRA must distribute all the assets in the account within 10 years of the original owner’s death.

Why Designate a Roth IRA Beneficiary?

Roth IRA account holders should complete a 澳洲幸运5官方开奖结果体彩网:beneficiary designation so that the remaining assets will be passed automatically to the beneficia🌌ries they select. Often, the beneficiary is a surܫviving spouse or children, but it could be another family member or friend.

When you open a Roth IRA, you fill out a form to name your 澳洲幸运5官方开奖结果体彩网:beneficiary, the person or persons who will inherit your funds after ♉you die. Completing this form ensures the account and its tax benefits go 𒁏to the person you intended.

Inheriting a Roth IRA as a Spouse

You have four options if you inherit a Roth IRA as a spouse:

Option 1: Spousal Transfer

With a spousal transfer, you treat the Roth IRA as your own. You’ll be subject to the same 澳洲幸运5官方开奖结果体彩网:distribution rules as if it had originally been yours. To complete a spousal transfer, the assets will move into your named account or your existing Roth IRA.

• You can withdraw contributions at any time.
• Earnings are taxable until you reach age 59½, and it’s been at least five years since your spouse first contributed to the account, the 澳洲幸运5官方开奖结果体彩网:5-year rule.
• This option is only available if you’re the sole beneficiary.
• You can designate your beneficiary.

Option 2🌸: Open an Inherited IRA, Life Expectancy Method

澳洲幸运5官方开奖结果体彩网:Assets are transferred into an inherited Roth IRA in your name. You’ll have to take the RMDs. But you have the option to postpone them until the latter of:

• The date when the original account holder would have turned age 73.
• Dec. 31 of the year following the year of death of the original account holder.

Distributions are spread over your 澳洲幸运5官方开奖结果体彩网:life expectancy. However, if there are other beneficiaries, withdraws are based on the oldest beneficiary’s life expectancy unless separate accounts are established before Dec. 31 of the year following the original owner’s death.

• You can withdraw contributions at any time.
• Earnings are taxable unless the 5-year rule is met.
• You won’t be subject to the 澳洲幸运5官方开奖结果体彩网:10% early withdrawal penalty.
• Assets in the account can continue to grow tax-free.
• You can designate your beneficiary.

Option 3: Open an Inherited IRA, 5-Year Rule

Under the 澳洲幸运5官方开奖结果体彩网:5-Year Rule, the assets are transferred to an inherited Roth IRA in your name. You can spread out the distributions, but you must withdraw all the assets from the account by Dec. 31 of the fifth year following the year of the original account holder’s death, if you aren't taking life expectancy payments. The 5-year rule applies to beneficiaries who aren't designated beneficiaries if the owner died before their required beginning date (such as an estate or trust).

• You can withdraw contributions at any time.
• Earnings are taxable unless the 5-year rule is met.
• You won’t be subject to the 10% early withdrawal penalty.
• Assets in the account can continue to grow tax-free for up to five years.
• You can designate your beneficiary.

Option 4: Lump-Sum Distribution

If you choose this option, all the assets in the Roth IRA are distributed to you. Contributions to the account aren't taxable, but the earnings are taxable if the Roth IRA was less than five years old when the original account owner died.

Inheriting a Roth IRA as a Non-Spouse

Non-spouses include adult children, grandchildren, other fam📖ily members, and friends. You have three o🃏ptions if you inherit a Roth IRA as a non-spouse:

Option 1: Open an Inherited IRA,𝓀 Life Expectancy Met🦹hod

Assets are transferred into an inherited Roth IRA in your name. You’ll be subject to RMDs that must begin by Dec. 31 of the year following the year of the original account holder’s death.

Distributions were once spread over a non-spouse’s lifetime if the heir was the sole beneficiary. But with the passage of the SECURE Act of 2019, all funds must be distributed within 10 years of the original owner’s death.

When there are multiple beneficiaries, distributions are based on the oldest beneficiary’s life expectancy unless separate accounts are established before Dec. 31 of the year following the original account holder’s death.

• You can withdraw contributions at any time.
• Earnings are taxable unless the 5-year rule is met.
• You won’t be subject to the 10% early withdrawal penalty.
• Assets in the account can continue to grow tax-free.
• You can designate your beneficiary.

Option 2: Open an Inherited IRA, 5-Year Rule

Aꦍssets are transferred to an inherited Roth IRA in your name, and you can spread out your distributions over time, but you have to withdraw everything by Dec. 31 of the fifth year following the year of the original owner’s death.

• You can withdraw contributions at any time.
• Earnings are taxable unless the 5-year rule is met.
• You won’t be subject to the 10% early withdrawal penalty.
• Assets in the account can continue to grow tax-free for up to five years.
• You can designate your beneficiary.

Option 3: Lump-Sum Distribution

With a 澳洲幸运5官方开奖结果体彩网:lump-sum distribution, the assets in the Roth IRA are distributed to you all at once. Contributions are tax-free, but earnings are taxable if the account was less than five years old when the original account owner died.

The Bottom Line

Roth IRA beneficiaries have several options, but tax consequences and distribution timelines vary. If you have a Roth IRA and don’t designate a beneficiary, the assets will be added to your estate and divided according to the laws in your state. Your heirs may lose tax benefits if you don't name them in advance of your death.

If you inherit a ♏Roth IRA as a spouse, you can treat the account as your own. However, most non-spousa♏l beneficiaries must make distributions and deplete the account within 10 years.