By Ian Berger, JD
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Do adult children who inherited a parent’s Roth IRA in 2020 need to take an RMD each year during the 10-year payout rule or may they leave it alone and deplete the account at the end of the 10th year? I’ve heard it both ways and would like to know which is correct.
Beneficiaries of Roth IRAs who are subject to the 10-year payout rule do not have to take annual RMDs during the 10-year period. The requirement to take RMDs within the 10-year period only applies when the IRA owner dies on or after her RMD required beginning date. But Roth IRA owners are not subject to RMDs, so they are always considered to have died before their RMD required beginning date.
I just inherited both a Roth IRA and a traditional IRA from a friend who was 64 years old at the time of death. I am 60 years old, so I am eligible to use the life expectancy rule for RMDs rather than the SECURE Act’s 10-year rule.
My question is whether I can elect to use the life expectancy rule for the traditional IRA (thus taking required annual RMDs), while at the same time electing to use the 10-year rule for the inherited Roth IRA (taking no annual RMDs on that account, but emptying it within 10 years after the year of death)?
Yes, you can do that – as long as the IRA custodian allows it. As an eligible designated beneficiary (EDB), you can use the life expectancy rule to stretch out RMDs. But EDBs (with approval of the custodian) can instead choose the 10-year payout if the IRA owner died before his RMD required beginning date, which your friend did. There’s no rule preventing you from choosing one payout rule for the traditional IRA and another for the Roth.