Designated Beneficiary

Wendell, age 55 and healthy, inherits his aunt's Roth IRA in 2026; he is not disabled, chronically ill, or a minor, and no age-gap exception applies, so he is a non-eligible designated beneficiary. His aunt had held the Roth IRA for over eleven years before her death. Which statement correctly describes Wendell's distribution requirement?

1. A.Because Roth IRA owners are never subject to lifetime RMDs, Wendell as beneficiary is also exempt from any distribution deadline and may leave the account untouched indefinitely.Wrong. The owner's lifetime RMD exemption does not extend to a beneficiary; beneficiary distribution rules are separate.
2. B.As a non-eligible designated beneficiary, Wendell must withdraw the entire account by the end of the 10th year following his aunt's death, the same 10-year rule that applies to an inherited traditional IRA in his position, even though the original owner never had a lifetime RMD requirement.Correct. The 10-year rule applies to inherited Roth IRAs for non-eligible designated beneficiaries just as it does to inherited traditional IRAs.
3. C.Wendell must begin annual required minimum distributions immediately based on his own life expectancy, because Roth IRA beneficiaries are held to a stricter standard than traditional IRA beneficiaries.Wrong. Non-eligible designated beneficiaries are not held to a stricter life-expectancy standard; the 10-year rule, not an immediate life-expectancy stretch, governs here.
4. D.Wendell may stretch distributions over his own life expectancy indefinitely, because the Roth IRA was held for more than five years before death, satisfying the five-year holding rule.Wrong. The five-year holding rule determines whether earnings are tax-free; it is a separate rule from the 10-year beneficiary distribution deadline.

Why: Roth IRA owners are never subject to lifetime RMDs, but that exemption belongs to the original owner and does not carry over to a beneficiary. As a non-eligible designated beneficiary, Wendell is still bound by the SECURE Act's 10-year rule: the entire account must be withdrawn by the end of the 10th year following his aunt's death, the same 10-year window that would apply to an inherited traditional IRA in his position.

A 45-year-old daughter - healthy, and NOT a minor, disabled, or chronically ill - inherits her father's traditional IRA in 2026. As the beneficiary, she must:

1. A.Empty the inherited IRA by December 31 of the tenth year after the year of deathCorrect - a healthy adult child is a non-eligible designated beneficiary subject to the 10-year rule.
2. B.Take annual distributions stretched over her own life expectancyThe lifetime stretch now belongs only to eligible designated beneficiaries - she does not qualify.
3. C.Roll the balance into her own IRA and defer to her own RMD ageTreating an inherited IRA as one's own is a SPOUSAL option only.
4. D.Empty the account within five yearsThe 5-year rule applies to non-designated beneficiaries such as an estate - she is a designated beneficiary with 10 years.

Why: Under the SECURE Act, a non-spouse designated beneficiary who is not an eligible designated beneficiary (spouse, minor child, disabled, chronically ill, or not more than 10 years younger) must empty the inherited IRA by December 31 of the tenth year after the year of death. The old lifetime stretch survives only for eligible designated beneficiaries. The clue is the list of statuses she does NOT hold. Review: inherited retirement accounts.