Is a Roth Spousal IRA Subject to RMD Distributions?

by Nola Moore, studioD

Unlike traditional individual retirement arrangements, Roth IRAs do not have an annual required minimum distribution once the IRA owner reaches age 70 1/2. This changes when the IRA owner dies: Roth and traditional IRAs both require minimum distributions to beneficiaries each year. There is a special exception, however, if the Roth beneficiary is a spouse and chooses to treat the IRA as his own.

Treat as Own

The IRS waives the beneficiary required minimum distribution rule completely if the surviving spouse elects to treat the IRA as his own. He does this by making a contribution to the Roth IRA account, or not taking an RMD withdrawal, or both. The spouse should also be designated as the account owner on all custodial and tax paperwork, usually denoted by an account name change.

Withdrawals in Error

If spouses take an RMD from the account, then choose to treat the IRA as their own, they can reverse the withdrawal by depositing the full amount of the RMD into their own Roth IRA account within 60 days of the initial distribution. Failure to redeposit serves as notice to the IRS that the spouse elects to be treated as a regular beneficiary, and he will be required to take RMD withdrawals each year from then on, or to empty the entire account within five years.

Sole Beneficiary

According to IRS Publication 590, the special spousal IRA rules do not apply if the spouse is not the sole beneficiary of the IRA or does not have full rights to the account. The account cannot be split between a surviving spouse and children or other beneficiaries. If the beneficiary is a trust or an estate, the spouse is also disqualified from spousal IRA rules, even if he is the sole beneficiary of the estate or trust, and must take required minimum distributions or empty the account within five years.

Ability to Move Assets

While it is not required, a spouse may move inherited Roth assets into another account via a trustee-to-trustee transfer or rollover. This meets the requirement for "treating as one's own," as long as the account is a Roth IRA or other qualified plan.

Adjustment of Five-Year Rule

In a personal Roth IRA account, the IRA owner incurs a penalty if she withdraws contributions from the account before it is five years old. There is a secondary five-year clock for any rollovers or traditional IRA conversions -- withdrawal of that money incurs a penalty until five years after the date of deposit, regardless of when the original account was opened. Inherited spousal IRAs function differently than other rollovers, however. The five-year clock for inherited spousal IRAs starts with the first Roth IRA deposit by either the IRA owner or the spouse, whichever is earlier. This means that if a spouse has a personal Roth account, then inherits one, he may use his original contribution as the five year start date. If the deceased made deposits earlier than that, the spouse may use that date instead.

About the Author

Nola Moore is a writer and editor based in Los Angeles, Calif. She has more than 20 years of experience working in and writing about finance and small business. She has a Bachelor of Science in retail merchandising. Her clients include The Motley Fool, Proctor and Gamble and NYSE Euronext.

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