Roth IRA Beneficiary Options
The owner of a Roth IRA and his beneficiaries have some options in funding the account, transferring money and more. However, the owner has much more flexibility than a beneficiary in the use and transfer of account money.
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Designation of Beneficiaries
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A Roth IRA owner can name one or more beneficiaries of the account, which may be individuals or entities like a trust, in the event of her death. A "designated" beneficiary is a living person with a determinable life expectancy; a "nondesignated" beneficiary is a trust, charity or other entity that does not have a determinable life expectancy. Her beneficiaries cannot designate account beneficiaries of their own upon inheriting the Roth IRA, unless the sole beneficiary is a surviving spouse.
Becoming an Owner
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A surviving spouse of a Roth IRA account holder who is also sole account beneficiary may either wait until the deceased spouse would have turned 70 1/2 to begin receiving distributions, or he can become the owner of the IRA. He may then make any and all decisions normally available to Roth IRA owners.
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Contributions
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Beneficiaries may not make contributions to inherited IRAs. Owners may make contributions up to a certain amount (as of 2010, generally $6,000 per year).
Withdrawals
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Any nondesignated beneficiary (such as a trust, charity or the estate) of a Roth IRA must empty its share of the account by the end of the fifth calendar year after the owner’s death. Designated beneficiaries take required minimum distributions based on the beneficiary’s life expectancy.
Combining Accounts
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Roth IRA beneficiaries may not combine inherited IRAs with their personal IRAs. However, they may combine multiple inherited Roth IRAs from the same account holder.
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