Inherited Roth IRA taxes

[Badger]

I plan on leaving my tIRA and Roth IRA to my wife's children. I understand the tIRA will need to be withdrawn by them within 10 years and pay the taxes. Does the tIRA need to be done in the same RMD amounts each year as applies to me? AND Does this also apply to the Roth IRA as well? If this applies to the Roth IRA will they have to pay taxes on the entire amount or just on the amount increased starting at the time of my death?
If they will have to pay taxes on the entire Roth I might as well withdraw all the money myself and invest it in the same mutual fund, pay taxes on any dividends in the coming years, and then they can start tax free withdrawls using the new basis.
Is this the game i need to play?


Cheers!

 

[RunningBum]

Inherited IRAs just need to be drained in 10 years. No need for RMDs, but they might want to spread withdrawals out to avoid a big tax hit in one year. Spouses and certain other beneficiaries (e.g, within 10 years of age of the deceased) can choose to treat it as their own IRA.

There are no taxes on an inherited Roth IRA. Not even the gains. Where did you get the idea they would be taxed?

 

[SecondCor521]

Inherited IRAs just need to be drained in 10 years. No need for RMDs, but they might want to spread withdrawals out to avoid a big tax hit in one year. Spouses and certain other beneficiaries (e.g, within 10 years of age of the deceased) can choose to treat it as their own IRA.

There are no taxes on an inherited Roth IRA. Not even the gains. Where did you get the idea they would be taxed?

+1

They'll have to drain the Roth IRA on the same 10-ish year time frame, but there are no taxes on it at all for them.

There's generally no reason to withdraw Roth assets prematurely. My personal plan is to leave the Roth to grow tax free during the entire 10-ish year time frame and then withdraw the entire amount on 12/31 of the last year possible to maximize tax free growth.

 

[Badger]

Inherited IRAs just need to be drained in 10 years. No need for RMDs, but they might want to spread withdrawals out to avoid a big tax hit in one year. Spouses and certain other beneficiaries (e.g, within 10 years of age of the deceased) can choose to treat it as their own IRA.

There are no taxes on an inherited Roth IRA. Not even the gains. Where did you get the idea they would be taxed?

+1

They'll have to drain the Roth IRA on the same 10-ish year time frame, but there are no taxes on it at all for them.

There's generally no reason to withdraw Roth assets prematurely. My personal plan is to leave the Roth to grow tax free during the entire 10-ish year time frame and then withdraw the entire amount on 12/31 of the last year possible to maximize tax free growth.

Thanks for the response.
I knew the inherited Roth had to be emptied in 10 years but with the IRS I didn't know if there were any other rules that applied. As I understand it when inheriting a non-tIRA or Roth stock the basis starts at the time of death and taxes have to be paid on any increase in value if cashed in. I didn't know if this same rule applied to the Roth basis as well for either an increase in basis or any dividends that accumulate.


Cheers!

 

[Winemaker]

There may be state inheritance taxes due on both but not Federal tax unless your estate hits the moving limit of $11.70 million. And then any income taxes due on the tIRA over the 10 year period.