Advanced Underwriting Consultants

Question of the Day – June 6

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: How are Roth IRA distributions to a non-spouse beneficiary taxed after the death of the taxpayer?

Answer: Qualified distributions from a Roth IRA are tax free.  For a distribution to be qualified from a decedent’s account, it must be made more than five years after the initial contribution to any Roth IRA account established by the taxpayer.

Any other distribution is nonqualified.  A nonqualified distribution from a Roth IRA is tax free up to the taxpayer’s investment in the account.

So if a nonspouse beneficiary liquidates the Roth account within five years of the decedent’s first contribution to a Roth, the balance distributed is nonqualified—and partly taxable.  If the beneficiary waits to withdraw gain until more than five years after the decendent’s first contribution, those withdrawals will be tax free.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.