When Does a Non-Spouse Beneficiary Have to Withdraw an Inherited Roth IRA?

A designated beneficiary who is not an eligible designated beneficiary must have the entire account distributed by the end of the calendar year that includes the tenth anniversary of the owner's death. Whether a withdrawal is also required in the intervening years depends on whether the owner died before, or on or after, the required beginning date.

The regulation applies them as though the Roth IRA owner died before the required beginning date, whatever the owner's age. For a designated beneficiary who is not an eligible designated beneficiary, that means the 10-year rule with no withdrawal required in the intervening years; an eligible designated beneficiary may take annual life expectancy payments.

Beneficiaries are determined as of September 30 of the year after the year of death. If separate accounts for each beneficiary are established by the end of that calendar year, the rules apply separately to each; if not, the aggregate distribution for later years is determined without the separate account rule.

25% of the amount that should have been withdrawn but was not, paid by the beneficiary. The rate drops to 10% when the missed amount is withdrawn from the same plan and a return reflecting the tax is filed, both inside the correction window, which ends at the earliest of a notice of deficiency, an assessment, or the last day of the second taxable year after the year the tax applies to. The IRS may waive the tax for reasonable error on a Form 5329 request, and the regulation waives it automatically in two cases.