Inherited Roth IRA Rules for Beneficiaries: Timelines and Taxes

When you inherit a Roth IRA, the rules that apply to you depend almost entirely on your relationship to the person who died. A surviving spouse has the most options. Most adult children, siblings, and friends have ten years to empty the account. A small group of eligible beneficiaries with qualifying conditions can stretch withdrawals over their own life expectancy. Understanding the inherited Roth IRA rules for beneficiaries matters because the money is generally tax-free, but missing a required distribution triggers an IRS excise tax of up to 25% of the shortfall.

Three Beneficiary Categories Set the Timeline

Federal law sorts inherited retirement account beneficiaries into three groups as of the date the owner died. Nothing you do afterward changes which group you’re in, and the group determines everything else.

The most favorable is the eligible designated beneficiary. Five types of people qualify: the surviving spouse, a minor child of the account owner (not a grandchild), someone who is disabled, someone who is chronically ill, or someone no more than ten years younger than the deceased owner.¹ These beneficiaries get the longest withdrawal timelines.

The designated beneficiary category covers any individual named on the beneficiary form who doesn’t qualify above. Adult children, grandchildren, friends, and siblings usually land here. They face the ten-year rule.

The third group is non-individual beneficiaries: estates, charities, and most trusts. These entities generally have five years to empty the account.²

If You Are the Surviving Spouse

A surviving spouse has three paths, and the right one usually turns on age and whether the money is needed soon.

Roll it into your own Roth IRA. You move the inherited assets into a Roth IRA in your name, new or existing. The IRS then treats the account as if it had always been yours. No required minimum distributions during your lifetime, and your own beneficiaries later inherit under whatever rules apply at your death.³
Keep it as an inherited Roth IRA. You open a separate inherited IRA in the deceased spouse’s name for your benefit and take distributions based on your own life expectancy. This can be the right call if you’re under 59½ and may need the money, because distributions from an inherited IRA are exempt from the 10% early withdrawal penalty regardless of your age.⁴
Use the ten-year rule. You can elect to empty the account by December 31 of the year containing the tenth anniversary of your spouse’s death. Few spouses choose this because the other options are more favorable.²

The rollover is the most common choice. It eliminates withdrawal requirements during your lifetime and preserves the tax-free growth that makes Roth accounts valuable.

If You Are a Non-Spouse Eligible Designated Beneficiary

If you qualify as an eligible designated beneficiary but you’re not the surviving spouse, you can stretch withdrawals over your own projected lifespan. The IRS requires you to use Table I, the Single Life Expectancy table, in Publication 590-B. Find your life expectancy factor for the year after the owner’s death based on your age that year, then reduce that factor by one for each subsequent year.⁵

A 50-year-old with a life expectancy factor of 36.2 would divide the account balance by 36.2 in the first distribution year, then 35.2 the next year, and on from there. The annual withdrawal is mandatory. Take too little and you owe an excise tax on the shortfall.

The upside is real. A chronically ill 45-year-old, for instance, could spread distributions over roughly 40 years instead of being forced to empty the account in ten.

If You Are Subject to the Ten-Year Rule

Most adult beneficiaries who inherit a Roth IRA after 2019 fall here. You have to withdraw the entire account balance by December 31 of the year containing the tenth anniversary of the original owner’s death.⁵

Inherited Roth IRAs carry a genuine advantage here over inherited traditional IRAs. Because Roth owners never have a required beginning date for distributions during their lifetime, the IRS treats every Roth owner as having died before that date.³ The practical result: no annual minimum withdrawal during the ten-year window. You can leave the money untouched for nine years and take it all in year ten. You can spread it out. The only hard deadline is the end of year ten.

Inherited traditional IRAs, by contrast, may require annual distributions inside the ten-year window when the original owner died after their required beginning date. Roth beneficiaries don’t face that problem.

Special Rules for a Minor Child

A minor child of the account owner (biological or legally adopted) qualifies as an eligible designated beneficiary, but only until the child reaches age 21 for IRA purposes. Before 21, required distributions are calculated using the child’s life expectancy under Table I, producing small annual amounts because a young life expectancy factor is high.⁵

Once the child turns 21, the ten-year clock starts. The account must be emptied by December 31 of the year the child turns 31.

One detail catches families off guard: this rule applies only to the account owner’s own children. Grandchildren, nieces, nephews, and stepchildren who were not legally adopted don’t qualify as eligible designated beneficiaries under the minor child provision. They fall under the standard ten-year rule regardless of their age.¹

If the Beneficiary Is a Trust, Estate, or Charity

When no individual is named, or the named beneficiary is an entity like a charity or the estate, the ten-year rule doesn’t apply. The account generally has to be emptied within five years of the owner’s death.² No withdrawals are required before the fifth year, but the account must be at zero by the deadline.

Trusts are the exception to that exception. A trust that meets four IRS requirements can qualify as a “see-through” trust, letting the IRS look through the trust and apply distribution rules based on the individual trust beneficiaries. The trust has to be valid under state law, must be irrevocable (or become irrevocable at the owner’s death), must have identifiable underlying beneficiaries, and must provide a copy of the trust document to the IRA custodian by October 31 of the year after the owner’s death. Even with see-through status, most trust beneficiaries still face the ten-year rule under post-2019 law.

How Distributions Are Taxed

Distributions from an inherited Roth IRA are generally income-tax-free, but a five-year holding period can trip you up on a recently opened account. The five-year clock starts on January 1 of the year the original owner first contributed to any Roth IRA, not the date you inherited.⁵

If that five-year period has passed, every dollar you withdraw is income-tax-free, whether it comes from contributions or earnings. If the account was opened less than five years before the owner died, the original contributions still come out tax-free because the owner already paid tax on them. The earnings portion may be subject to federal income tax until the five-year mark is reached.

One piece of good news beneficiaries often miss: distributions from an inherited IRA are completely exempt from the 10% early withdrawal penalty, regardless of your age, because they’re made after the death of the account owner.⁴ You don’t have to be 59½ to access these funds penalty-free.

The Penalty for Missing a Required Distribution

If you’re required to take annual distributions because you’re an eligible designated beneficiary using the life expectancy method, and you withdraw less than the required amount, the IRS imposes an excise tax equal to 25% of the shortfall.⁶ Miss a $10,000 required distribution and the penalty is $2,500.

SECURE 2.0 added a correction mechanism that can drop the penalty to 10%. To qualify, you have to withdraw the missed amount and file a tax return reflecting the corrected excise tax during the correction window, which generally runs from the date the tax is imposed until the end of the second tax year after the year you missed the distribution.⁶ The same $10,000 miss costs $1,000 instead of $2,500 if you catch it in time.

Beneficiaries under the ten-year rule for an inherited Roth IRA face this penalty only if the account isn’t fully emptied by the end of year ten. Because no annual distributions are required during the ten-year window for inherited Roth accounts, there’s nothing to miss until the final deadline.

Turning Down the Inheritance

Sometimes the best move is to refuse the inheritance. A beneficiary who doesn’t need the money may want to disclaim the Roth IRA so it passes to the next person in line, such as a younger family member who could benefit from a longer tax-free growth period. Federal law sets strict requirements for a qualified disclaimer: it has to be in writing, delivered within nine months of the owner’s death, and you must not have already accepted any benefits from the account.⁷

The nine-month deadline is firm. Take even a single distribution before disclaiming and the disclaimer is invalid. The disclaimed interest also has to pass to someone else without any direction from you, which means the account goes to the contingent beneficiary named on the Roth IRA form, or to the estate if none is named. Verify who would actually receive the assets before disclaiming, because you can’t choose the next recipient.

Claiming the Account

To claim an inherited Roth IRA, contact the financial institution holding the account. The most important document is a certified copy of the owner’s death certificate, which triggers the transfer. You’ll also need your Social Security number for IRS reporting, and having the decedent’s account number speeds things up.

The custodian will send a beneficiary claim form asking you to select the type of inherited account and your distribution method. Pay close attention to the relationship field on that form. It determines which distribution rules the custodian applies. If the custodian codes you as a non-spouse designated beneficiary when you actually qualify as an eligible designated beneficiary, you could lose access to the life expectancy method.

Some custodians require a Medallion Signature Guarantee for transfers above a threshold (commonly $100,000) or when proceeds are sent to a different address or bank account than the one on file. A Medallion Signature Guarantee is not the same as a standard notary stamp; you typically obtain one from a bank, credit union, or brokerage firm that participates in a Medallion program.

Processing generally takes five to ten business days after the custodian receives a complete package. Once the assets move into the inherited Roth IRA, verify the account is titled correctly. It should read something like “[Deceased Owner’s Name], deceased, Roth IRA, FBO [Your Name], Beneficiary.” That titling preserves the tax-advantaged status and signals to the custodian which distribution rules govern the account going forward.

1
Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans – Section: Required Distributions
2
Internal Revenue Service. Retirement Topics – Beneficiary
3
Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs
4
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
5
Internal Revenue Service. Publication 590-B – Distributions From Individual Retirement Arrangements (IRAs)
6
Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans
7
Office of the Law Revision Counsel. 26 USC 2518 – Disclaimers