Lou S. Posted December 22, 2023 Share Posted December 22, 2023 A participant starts making ROTH-401(k) contributions. Participant is over 59.5 but not yet age 73. Before he reached the 5 year aging rule he dies also before reaching age 73. Are the earnings taxable to the beneficiary? Can the beneficiary rollover to an Inherited ROTH-IRA? if yes how quickly must the beneficiary exhaust the ROTH? Does the answer change if the beneficiary is a spouse v non spouse? Beneficiary is spouse and is over age 73. Can she roll to regular ROTH IRA and treat as her own thus escaping all RMD requirements while alive? Beneficiary and Participant were married less than 1 year at time of death but she was beneficiary for many years before they were married and I assume for IRS purposes the fact that they were married at time of death is the only relevant piece to the tax questions and ability or inability to stretch the distribution as long as possible. Link to comment Share on other sites More sharing options...
Popular Post Appleby Posted December 26, 2023 Popular Post Share Posted December 26, 2023 On 12/22/2023 at 4:26 PM, Lou S. said: A participant starts making ROTH-401(k) contributions. Participant is over 59.5 but not yet age 73. Before he reached the 5 year aging rule he dies also before reaching age 73. Are the earnings taxable to the beneficiary? Can the beneficiary rollover to an Inherited ROTH-IRA? if yes how quickly must the beneficiary exhaust the ROTH? Does the answer change if the beneficiary is a spouse v non spouse? Beneficiary is spouse and is over age 73. Can she roll to regular ROTH IRA and treat as her own thus escaping all RMD requirements while alive? Beneficiary and Participant were married less than 1 year at time of death but she was beneficiary for many years before they were married and I assume for IRS purposes the fact that they were married at time of death is the only relevant piece to the tax questions and ability or inability to stretch the distribution as long as possible. Are the earnings taxable to the beneficiary? . No Can the beneficiary rollover to an Inherited ROTH-IRA? Yes. But for a spouse beneficiary, it is better to roll to her own Roth IRA ( no RMDs while she is alive) if yes how quickly must the beneficiary exhaust the ROTH? Do you mean 'what are the RMD requirements? If yes, see No 2. Does the answer change if the beneficiary is a spouse v non spouse? Yes. The only option for a non-spouse is an Inherited Roth IRA. Also , must be a designated beneficiary to be eligible for the rollover. Beneficiary is spouse and is over age 73. Can she roll to regular ROTH IRA and treat as her own thus escaping all RMD requirements while alive? Yes Beneficiary and Participant were married less than 1 year at time of death but she was beneficiary for many years before they were married and I assume for IRS purposes the fact that they were married at time of death is the only relevant piece to the tax questions and ability or inability to stretch the distribution as long as possible. Yes. Belgarath, Luke Bailey, Bri and 2 others 4 1 Life and Death Planning for Retirement Benefits by Natalie B. Choatehttps://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/ www.DeniseAppleby.com Link to comment Share on other sites More sharing options...
Luke Bailey Posted December 29, 2023 Share Posted December 29, 2023 Appleby, the rollover to spouse's own IRS will start a new 5-year holding period, right? Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
Appleby Posted December 29, 2023 Share Posted December 29, 2023 19 hours ago, Luke Bailey said: Appleby, the rollover to spouse's own IRS will start a new 5-year holding period, right? Hi Luke- yes. But, if the spouse already had a Roth IRA, the first Roth IRA starts the 5-year period for a qualified distribution, Luke Bailey 1 Life and Death Planning for Retirement Benefits by Natalie B. Choatehttps://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/ www.DeniseAppleby.com Link to comment Share on other sites More sharing options...
Lou S. Posted January 2 Author Share Posted January 2 On 12/28/2023 at 4:40 PM, Luke Bailey said: Appleby, the rollover to spouse's own IRS will start a new 5-year holding period, right? Sure, but she should also start with a basis equal to the rollover. And money coming out of the ROTH is basis recovery first so as long as she doesn't withdraw more than the initial rollover in the first 5 year, no taxes. At least as I understand it, assuming she doesn't already have a ROTH IRA which I don't believe she does. Link to comment Share on other sites More sharing options...
Appleby Posted January 2 Share Posted January 2 4 hours ago, Lou S. said: Sure, but she should also start with a basis equal to the rollover. And money coming out of the ROTH is basis recovery first so as long as she doesn't withdraw more than the initial rollover in the first 5 year, no taxes. At least as I understand it, assuming she doesn't already have a ROTH IRA which I don't believe she does. You would be right, if the 5-year period had been met for the 401(k). But in this case, it hasn't , right? "Before he reached the 5 year aging rule he dies". That would mean the rollover is from a non-qualified distributions. In such cases, the entire rolled over amount is not basis. Instead, the rolled over amount is split - with the basis going into the basis bucket of the Roth IRA and the earnings going to the earnings bucket of the Roth IRA. Luke Bailey and Lou S. 1 1 Life and Death Planning for Retirement Benefits by Natalie B. Choatehttps://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/ www.DeniseAppleby.com Link to comment Share on other sites More sharing options...
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