By Andy Ives, CFP®, AIF®
IRA Analyst
QUESTION:
A husband owned a Roth IRA which had been in existence for at least 5 years. He died in January of 2025. His wife was his primary beneficiary. The wife opened a Roth IRA in late January 2025 to receive the distribution from husband’s Roth IRA. The wife then unexpectedly died at the end of February 2025 and each of the three adult children received 1/3 of her Roth IRA into inherited Roth IRAs for each of them.
Are the kids’ inherited Roth IRAs subject to the remainder of the 5-year rule (~ 5 years) because they inherited assets from mom’s Roth IRA which had only been existence for ~ 1 month, or are they exempt from the 5-year rule because the dollars could be sourced back to dad’s Roth IRA which had been in existence for at least 5 years?
Thanks in advance for your input.
Geoff
ANSWER:
Geoff,
When Husband died, his 5-year clock carried over to Wife with the spousal rollover. (I assume she did not have her own Roth IRA. Hypothetically, if she did, then Wife could choose the 5-year clock that was most beneficial to her.) Now that Wife has died, the children all get the 10-year payout rule on their inherited IRAs. There are no annual required minimum distributions (RMDs) in years 1 – 9. After their Dad’s original 5-year clock is satisfied, then all earnings in the inherited Roth IRAs will be tax free. For now, they will have tax-free access to any contributions or conversions that Dad did. Based on Roth IRA distribution ordering rules, contributions come out first, then converted dollars, and then the earnings.
QUESTION:
My client is age 72. She has a traditional IRA and an inherited IRA. She would like to make a 2025 qualified charitable distribution (QCD) from the inherited IRA for $1,000. Because she is making a QCD from the inherited IRA, is she allowed to make a 2025 deductible contribution to her traditional IRA?
Will
ANSWER:
After age 70½ , deductible IRA contributions and QCDs do not mix. If a deductible contribution is made to an IRA at age 70½ or older, that amount will offset the same amount of any future QCD, thereby making all or a portion of the QCD a taxable distribution. It does not matter that she is doing the QCD from the inherited IRA. If she makes a deductible IRA contribution of $1,000 or more, her entire $1,000 QCD will be taxable.
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https://irahelp.com/the-5-year-clock-and-qualified-charitable-distributions-todays-slott-report-mailbag/