At a glance
- The grandchild misses the minor-child exception because it covers only an account holder's children, Brenner wrote.
- A client over 59½ who has been in a Roth 401(k) more than five years and rolls it directly to a Roth IRA has basis available tax- and penalty-free immediately, Brenner wrote.
- The dates advisors need are when the first Roth IRA was opened and when the rollover landed, since the 401(k)'s tenure does not cover the earnings.
All three beneficiaries of an 84-year-old IRA owner's account — children aged 52 and 56 and a grandchild aged 8 — are non-eligible designated beneficiaries subject to the 10-year rule, Sarah Brenner, Ed Slott — IRAHelp's director of retirement education, wrote in the Oct. 29 Slott Report mailbag.
The grandchild misses the minor-child exception because it covers only an account holder's children, Brenner wrote. None of the three is a spouse, disabled or chronically ill. That means the 8-year-old must empty the inherited IRA within 10 years, not stretch distributions over a lifetime.
A client over 59½ who has been in a Roth 401(k) more than five years and rolls it directly to a Roth IRA has basis available tax- and penalty-free immediately, Brenner wrote. Earnings accruing afterward need five years from the year of the rollover if this is the client's first Roth IRA.
The dates advisors need are when the first Roth IRA was opened and when the rollover landed, since the 401(k)'s tenure does not cover the earnings. Moving the Roth IRA to a new custodian does not restart that clock, as Private Wealth Daily previously reported.
Reported by the Tax & estate planning desk from Ed Slott — IRAHelp and Private Wealth Daily archive. Published . Corrections