Ask the Expert: Splitting and spending a Roth IRA
When I pass, my wife will inherit my Roth IRA. She can take her time to use it up. If my son were to inherit it, he’d have 10 years to use it up. What if I left it to both of them, divided 50/50? When my wife passes, if she still has money left, can she make my son her beneficiary? Would he then have 10 years to use it? Can you split a Roth IRA?
Indeed you can, by designating your wife and your son as 50% beneficiaries on the IRA beneficiary form.
As you clearly understand, there are several sets of IRA distribution rules. In fact, there are three distinct IRA beneficiary categories, says Ed Slott, a Rockville Centre tax accountant.
The first category (“eligible designated beneficiaries”) includes your surviving spouse; your minor children until age 21; and beneficiaries who are disabled or chronically ill, or no more than 10 years younger than you. They can stretch distributions from an inherited Roth IRA over their life expectancies.
The second category (“non-eligible designated beneficiaries”) is for everybody who’s not in the first group. As Roth IRA beneficiaries, they must empty an inherited account by the end of the 10th year after the original owner’s death.
The third category is for non-living beneficiaries like estates and charities.
As a surviving spouse, your wife would have a choice, says Slott. She could roll her 50% share into a Roth IRA of her own, naming your son as her beneficiary. Or she could remain a beneficiary, moving her share to an inherited Roth which named him as her successor. Either way, he’d have 10 years to empty the account he inherited.
The bottom line
IRA beneficiaries should always double-check how fast they must empty inherited accounts.
More information
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Can you dig it? Long Islanders clear out snow from the post-Christmas storm. NewsdayTV's Jamie Stuart reports.
