Inheriting a Roth IRA offers significant advantages: tax-friendly growth, flexible access options, and fewer complexities compared to many other assets. The account is designed to support long-term planning rather than knee-jerk decisions, which can be a relief when everything else feels unsettled.
There are still rules that shape what happens next. The key is knowing where you fit, what the account can do for you, and how to sequence your choices efficiently.
Immediate Actions & Core Facts for Beneficiaries
In the initial period after inheriting the account, focus on the following tasks: Make sure the account title is correct, assemble documents, confirm your category, and sketch a short calendar so you don’t miss any checkpoints. This keeps you from rushing any withdrawals and helps you move forward with purpose.
Most importantly, correct inherited title formatting and avoid commingling: Ask the custodian to open an appropriately titled inherited account that names the deceased account holder and your role as the beneficiary, separate from any personal Roth accounts you already own; this protects reporting and maintains IRA rules.
Gather core documents: Locate the beneficiary form, death certificate, the first year the decedent made a Roth contribution or conversion, and the most recent Forms 5498; these validate the five-year history behind any Roth IRA distributions.
Confirm your beneficiary category: Identify whether you’re a spouse, an eligible designated beneficiary, another designated beneficiary, or a non-designated beneficiary (through an estate or certain trusts); this confirmation only sets the timetable for distributions, not whether earnings are taxable.
Build a date map: Create a short calendar based on the date of death and your category (e.g., separation of accounts by December 31st of the year following death when multiple heirs are involved), so that each subsequent step is completed on time and documented.
Is an Inherited Roth IRA Taxable?
Distributions from an inherited Roth fall into three pools: original contributions, conversions, and earnings. Contributions are after-tax dollars, conversions are amounts the original account owner transfers from another account into the Roth, and earnings are the growth that occurs on top. The five-year clock determines whether earnings qualify as tax-free when you withdraw them.
The five-year period begins on January 1st of the tax year in which the decedent first funds any Roth IRA (through contribution or conversion). If at least five tax years have elapsed by the time you take money out, earnings can be tax-free; if the period isn’t complete, only the earnings portion may be taxable.
The sequence the IRS applies is contributions first, then conversions. Earnings, so if the five-year mark hasn’t been met, pulling only up to contributions and conversions avoids touching earnings and, in turn, avoids federal income tax. If you tap earnings before the period is satisfied, that slice is taxed at your ordinary income rate.
Some states mirror federal treatment while others diverge. A quick residency check helps you avoid surprises with state taxes on earnings when the five-year mark isn’t met, especially if you split time between states or have recently moved. The aim is simple: confirm the clock, know which dollars you’re actually withdrawing, and time distributions so tax character matches your plan under IRS rules.
High-Level Inherited Roth IRA Rules
It is helpful to have a high-level understanding of the general rules that govern timing. Make sure you consider the following when receiving an account:
Which timetable applies: You may be required to empty the Roth account within 10 years, 5 years, or over a life expectancy schedule, depending on your beneficiary status.
What starts the clock: The timeline begins on the date of death. For example, if you’re under the 10-year approach, the inherited account must be fully distributed by December 31st of the tenth year following the decedent’s passing.
Annual withdrawals: Some beneficiary categories require annual amounts, while others only require a complete cleanout by the end of the applicable window.
No early-withdrawal penalties: The 10% early-distribution penalty that can apply to an owner’s Roth generally does not apply to beneficiaries taking distributions from an inherited Roth.
Multiple heirs and separate accounts: When there are several spouses/children/heirs, splitting into separate inherited Roths by December 31st of the year after death preserves each person’s timing and simplifies records.
Spousal Beneficiary Options
A surviving spouse can “treat as own,” and keep the account as an inherited Roth, or disclaim some or all to align with family goals and broader estate planning. Each path changes timing, access, and administration.
Treat-as-own makes the assets part of your personal Roth framework. That means you follow your age-based Roth rules going forward, may make future IRA contributions (subject to eligibility), and you won’t face beneficiary-style payout deadlines. You also won’t have beneficiary-based RMD rules on the inherited balance.
Keep-as-inherited preserves the inherited account title and reporting. You can access funds at any age without early-withdrawal penalties under inherited-account rules. However, the account generally must be emptied by the applicable deadline (for many spouses who inherit it, the life expectancy or a 10-year window may apply, depending on elections and circumstances). Disclaiming can redirect IRA assets to contingent heirs or trusts when that better fits the family plan and beneficiary design.
Choosing among these options comes down to your age, cash-flow needs, survivor income strategy, and whether you value the flexibility of ongoing contributions within an IRA versus maintaining beneficiary mechanics and timelines.
Non-Spouse Beneficiary Pathways
Most non-spouse designated heirs have 10 years to fully empty the account, with no fixed annual requirement for Roths in that category; pacing withdrawals across the window can support growth while matching cash needs. If you’re a non-designated heir, often an estate or a trust without see-through status, you generally have 5 years to empty the account by December 31st of the fifth year.
Eligible designated beneficiaries (EDBs), such as a minor child of the IRA owner, someone who is disabled or chronically ill, or an individual not more than 10 years younger, may use life-expectancy payouts, which stretch IRA distributions over many years using annual factors. For a minor child of the deceased, life expectancy applies until the child reaches age 21; once the child turns 21, the 10-year clock begins.
When multiple heirs are named, splitting into separate inherited Roths by December 31st of the year after death prevents one person’s timeline from driving everyone else’s and keeps the ledgers cleaner for distributions to beneficiaries.
Trusts as Beneficiaries
When a trust is named, the trustee manages the account and requests distributions. Your timetable depends on the trust’s status and the timely delivery of required documents:
Identify the trust type and its timetable: If the trust qualifies as a see-through trust, it’s generally treated like a designated beneficiary and may use the 10-year cleanout or, if it meets the eligible-beneficiary criteria through its terms/beneficiaries, a life-expectancy schedule. If it does not qualify, it’s typically treated as a non-designated beneficiary and follows a 5-year cleanout.
Deliver documentation promptly: Expect to provide the trust instrument (or certification), the death certificate, and the beneficiary form before the custodian will process requests. Late or incomplete paperwork can default the account into a shorter timetable, so set internal deadlines earlier than the custodian’s cutoff.
Match distributions to trust terms: A conduit trust generally distributes amounts to beneficiaries each year, while an accumulation trust can retain amounts for future needs. The trust’s language, not individual heirs, governs who receives cash and when, but the overarching deadline (10-year or 5-year) still controls the end date for emptying the account.
Coordinate tax reporting and cash routing: The trustee should maintain a distribution log (including date, amount, purpose, recipient account, and confirmations) and track any earnings distributed during the decedent’s five-year period. Proper entries support accurate K-1s, beneficiary returns, and trust filings.
Distribution Pacing & Recordkeeping
Establish a simple rhythm that aligns with your cash flow and distribution deadline. Strong records keep tax prep, audits, and coordination straightforward:
Cash-flow-aligned pacing within the applicable window: Map withdrawals to specific uses (such as monthly bills, an annual trip, or quarterly charitable gifts), so you spend with intention while keeping the account invested between draws. This approach respects the end date (for example, December 31st of the tenth year) and helps you avoid big one-time liquidations that could disrupt your broader portfolio mix.
Applying ordering rules tactically: If the five-year period for the decedent’s Roth isn’t yet satisfied, prioritize distributing contributions and conversions before touching earnings. That sequence allows you to access dollars without generating taxable earnings and buys time for the five-year clock to complete.
Portfolio coordination: Pair Roth withdrawals with sales in a brokerage account or distributions from traditional IRAs to keep annual taxes steadier. For some years, using Roth first can help you stay within a preferred bracket when other income (like bonuses or property sales) pushes higher.
Documentation discipline: Keep a running ledger that tracks starting amounts for contributions, conversions, and earnings, plus what you withdraw from each bucket every year. Capture the source for each figure (custodian statements, 5498s, or letters) so your trail is audit-ready.
Withholding and estimated-tax logistics: If a portion of earnings will be subject to income tax (for example, distributions made before the five-year period is complete), plan for quarterly payments so that April isn’t a surprise. Record the payment confirmations alongside your withdrawal notes to keep everything in one place.
Compliance Pitfalls to Avoid
Avoid common errors that shrink flexibility or create last-minute stress. A brief annual review helps keep paperwork tidy and pacing on track:
Incorrect titling or commingling: If the inherited Roth is opened under your personal Roth title, or assets get mixed, custodians may treat distributions improperly. Correct errors promptly to ensure reporting aligns with IRA distribution rules, and the account retains its inherited status.
Missing the 10-year (or 5-year) deadline: Waiting until late in the window increases the risk of administrative delays, market volatility at an inopportune moment, or simple oversight. Put reminders on your calendar for mid-year progress checks and a final distribution by December 31st of the last year.
Confusing five-year clocks: The decedent’s five-year period governs whether earnings are tax-free for the beneficiary; your own Roth history doesn’t replace that clock. When records are scarce, request custodian letters and favor distributions that adhere to contributions and conversions first.
Thin basis/conversion records: If you can’t show how much is contributions vs. conversions vs. earnings, tax reporting can go sideways. Build a one-page index with totals, sources, and a link to each document so your CPA can file quickly and confidently.
Not separating for multiple heirs: If separate inherited Roths aren’t created by December 31st of the year after death, everyone can be locked into a timetable that doesn’t fit all. Split early so each heir controls pacing, recordkeeping, and end-date management.
Trust paperwork gaps: Missing or late trust documents can cause the account to be subject to the 5-year cleanout when a 10-year or life-expectancy schedule might have been available. Assign a single point of contact to chase signatures and track submission receipts.
Is an Inherited Roth IRA Taxable? FAQs
1. What does the five-year period mean for taxation of my withdrawals?
The five-year period begins on January 1st of the tax year in which the decedent first funds any Roth IRA (through contribution or conversion). Once five tax years have passed, earnings can be withdrawn tax-free; before that, only the earnings portion may be taxable at ordinary rates, while contributions and conversions come out first and are not taxed.
2. If the Roth was only three years old, what part is taxable?
Distributions are ordered as contributions, then conversions, then earnings. You can withdraw up to the combined amount of contributions and conversions without federal income tax; only the earnings portion taken before the five-year period completes is taxable at your ordinary rate.
3. Can I add new contributions to an inherited Roth IRA?
No. New money goes to your own Roth if you’re eligible. The inherited account follows beneficiary mechanics and can’t receive fresh contributions.
4. What if multiple beneficiaries are named? Can we choose different timelines?
Yes, if you create separate inherited Roths by December 31st of the year after death. Splitting gives each person control over pacing and the end date without forcing a fixed timeline for everyone.
5. Do any states treat inherited Roth earnings differently from federal rules?
Some do. Check your resident state’s rules, especially if you moved recently or split residency, so you aren’t surprised by state taxes if earnings are withdrawn before the five-year period completes.
Partner With BR Wealth Management to Get Your Inherited Roth Right
Inheriting a Roth is a chance to combine flexibility with thoughtful timing. You protect the account’s advantages when you align the rules, the five-year clock, and your real-world cash-flow needs.
The team at BR Wealth Management will help you title accounts correctly, verify important dates, and select a timetable that aligns with your status, while coordinating withdrawals with your broader portfolio. We also partner with your tax professional and estate planning attorney (or personally recommend professionals from our network) to ensure that reporting, trust terms, and paperwork remain streamlined.
If you’d like help planning for an Inherited Roth IRA, schedule a complimentary consultation. We’ll review your situation carefully, confirm deadlines, and map out a thoughtful distribution path you can follow with confidence.
The information contained herein is for educational purposes only and does not constitute investment, legal, or tax advice. Individual circumstances vary, and you should consult your own financial, legal, and tax advisors before making any decisions. All strategies discussed are subject to change based on current laws and regulations.
Recognized multiple years as a Best in State Wealth Advisor by Forbes, Brian is the Managing Principal at BR Wealth Management - a Boise, Idaho firm that helps families across the country to craft tailored, tax-efficient plans for retirement income and multi-generational wealth transfer.
The Forbes Best in State Wealth Advisor ranking algorithm is based on industry experience, interviews, compliance records, assets under management, revenue and other criteria by SHOOK Research, LLC, which does not receive compensation from the advisors or their firms in exchange for placement on a ranking. Investment performance is not a criterion. Please click here to see the full ranking.