Generally, the designated beneficiary must settle the account by the end of the tenth year following the year of the IRA owner's death (this is known as the 10-year rule). The 5-year rule applies to distributions from an inherited IRA. To withdraw profits from an inherited IRA, the account must have been open for a minimum of five years at the time of the original account holder's death. He was the spouse of the deceased and the sole beneficiary of the Roth IRA and decided to treat it as his own IRA.
He understands that IRAs wouldn't be very popular if they couldn't be bequeathed and if transferring them would create a tax burden for beneficiaries. A Roth IRA is an individual retirement plan that, except for what is explained in this chapter, is subject to the rules that apply to a traditional IRA (defined below). However, spouses, beneficiaries who are not 10 years younger than the deceased, a minor child of the plan participant, a disabled person, or a person with a chronic illness have more flexibility under the SECURE Act; they can transfer the existing IRA into their name and defer distributions. You can receive distributions from your traditional IRA that are part of a series of substantially equal payments throughout your life (or your life expectancy) or over your lifetime (or the combined life expectancy) from you and your beneficiary, without having to pay the additional 10% tax, even if you receive such distributions before your 59th and a half years of age.
If you cannot accept the required distributions because you have a traditional IRA invested in a contract issued by an insurance company that is in the process of delinquency of a state insurer, the 50% excise tax does not apply if the conditions and requirements of tax procedure 92-10 are met. You may be able to make a qualifying HSA fund distribution from your traditional IRA or Roth IRA to your HSA. In this publication, the original IRA (sometimes called ordinary or regular IRA) is referred to as a “traditional IRA.” If only deductible contributions were made to your traditional IRA (or IRA, if you have more than one), it's not based on your IRA. An IRA beneficiary is an eligible designated beneficiary if the beneficiary is the owner's surviving spouse, the owner's youngest child, a disabled person, a person with a chronic illness, or anyone else who is no more than 10 years younger than the owner of the IRA.
If non-deductible contributions have been made or after-tax amounts have been transferred to your IRA, the distributions consist partly of non-deductible (basic) contributions and partly of deductible contributions, profits, and earnings (if any). Of course, there are other ways to treat Roth IRA that have different implications, and you'll want to explore which one works best for your situation. If the inherited RMD distribution rules change, be sure to consult your financial and tax professional to assess the implications and evaluate any potential planning opportunities. The IRA account balance is the amount of the IRA at the end of the year prior to the year for which the minimum required distribution is calculated.
If the traditional IRA ceases to be an IRA because you or your beneficiary have prohibited a transaction, neither you nor your beneficiary are responsible for these special taxes. If you have two or more IRAs and want to use the amounts of several IRAs to make a qualifying HSA fund distribution, you must first make an IRA-to-IRA transfer of the amounts that will be distributed in a single IRA and then make the one-time distribution of qualified HSA funds from that IRA.