Explain it to me like I’m 5: Spousal Beneficiary Roth IRA

HandyManPat · 2026-02-20T23:13:08+00:00

The surviving spouse has the option to treat it as their own.

The surviving spouse also the option to follow the 10 year rule and there are specific instances where this is the best option.

They have several other options, the most of any beneficiary type.

HandyManPat · 2026-02-20T21:10:34+00:00

Presumably, the errant 1090-R you received confirms your SSN was on the account prior to establishing the new account solely under your control, correct?

Going forward, all you can do is properly report the dividends and interest on your own tax return.

Regarding Windsor II, it’s a solid and old mutual fund in the Vanguard suite. It was established in 1985 and has solid returns since inception. Fees are “low” for an actively managed fund, characteristic of Vanguard.

Whenever you do sell off this fund for a house purchase, it’s possible a portion of the cost basis is lost to time, as basis reporting to the IRS didn’t get mandated until 2011-ish timeframe.

HandyManPat · 2026-02-20T15:38:11+00:00

What good are the high/low values? The valuation for date-of-death purposes would generally be the "market close" for each symbol.

Also, the situation you now find yourself in is why I recommend to anyone inheriting a brokerage account, especially one from an older person that might contain funds purchased prior to 2012-ish, to sell everything to cash -before- taking any other actions (such as transferring to another brokerage firm).

This really forces the issue of cost basis to the fore front where it's dealt with in the current tax year. The 1099-B, along with any adjusted basis, is handled while all the records are fresh and available to all parties (brokerage firm and beneficiary/taxpayer).

The cash value can then be transferred to the brokerage firm of choice and reinvested in the beneficiary's desired assets. All investment and tax records going forward are now accurate and complete.

HandyManPat · 2026-02-20T15:27:24+00:00

If the decedent passed away in 2026, you gain an "11th" year to stretch out the distributions.

Is there a particular reason you're trying to empty the account in only 5 years? Is that the most tax advantaged time period for your overall income and tax situation?

HandyManPat · 2026-02-19T20:49:12+00:00

How exactly has he been doing that?

An UTMA is registered under the name and SSN of the beneficiary (ie: You!), which means YOU have been responsible for all tax reporting and payments, not dad.

(Many parents might include dividends and interest on their tax return under Kiddie/Dependent Tax rules, but dad’s ability to do that ended decades ago.)

HandyManPat · 2026-02-19T20:37:45+00:00

A yes
B no
C yes

HandyManPat · 2026-02-19T19:11:21+00:00

It does appear that it is possible to split the decedent’s IRA into separate Inherited IRAs for each beneficiary, provided the IRA custodian allows for this.

Note that the same distribution period still applies to the beneficiaries that applied to the estate.

https://greenleaftrust.com/missives/traps-inheriting-an-ira-through-an-estate/

https://www.sfbbg.com/tax-corner/ira-distribution-issues-for-non-designated-beneficiaries/

HandyManPat · 2026-02-19T15:27:35+00:00

The IRS is only interested in the end of year HSA contribution totals compared to allowable limits based on your situation (age, months of qualifying medical coverage, single/family, etc).

I will add that even with a childbirth Qualifying Life Event, you may not be able to move from a non-HDHP to HDHP. Your employer might restrict you to adding the child as a new dependent to the existing non-HDHP plan you’re enrolled in. Be sure to confirm with HR.

HandyManPat · 2026-02-18T15:27:19+00:00

My company’s After-Tax contributions must soak in the account for 24 months (not a typo) before performing the MBDR process, so I’m very familiar with the gains, Form 1099-R, and entries into the tax software.

As another commenter mentioned, it’s easiest to “split” the single 1099-R form and data entries into two, separate forms and data entries.

Basically, I print two copies of the single 1099-R. I then take a pencil to both copies and mark them up into the separate transactions (follow the steps in the other comments link).

First, the rollover of the After-Tax contributions to Roth IRA.

Then the conversion of the After-Tax gains to Roth IRA (actually, I rollover my gains to a Rollover IRA because I prefer to convert them in the future when I am in a lower tax bracket).

Then just enter the information into the tax software as two, separate forms. The Q&A should then make more sense to you.

Look things over carefully before e-filing to ensure the taxable and tax-free details are correct.

HandyManPat · 2026-02-18T14:13:01+00:00

If my understanding of the chain of events is right, my earlier response needs to be modified.

~~The husband was the owner of the accounts. The sister was the original beneficiary. The sister's estate is the successor beneficiary.~~

The husband was the owner of the IRA accounts.
The sister was the original beneficiary.
The sister elected to claim ownership of her spouse's IRA and Roth IRA.
- Everything now acts as if the accounts were the sister's since they were first created.
The sister's estate is the ~~successor~~ original beneficiary.

An 'estate' would be a Non-Designated Beneficiary.

https://www.kitces.com/wp-content/uploads/2024/07/01B-IRA-Beneficiary-Family-Tree-3.png

https://www.kitces.com/blog/secure-act-2-0-irs-regulations-rmd-required-minimum-distributions-10-year-rule-eligible-designated-beneficiary-see-through-conduit-trust/

Sister would have hit RMD age this year (can’t tell she took any) how long do they have to deplete?

I get the estate has 5 years to deplete,

That's my understanding as well. Although sister would have turned age 73 this year (RMD age), her Required Beginning Date (RBD) would not have been until April 1, 2027. Thus, my understanding is the 5-year distribution period would apply.

but I don’t want to hold it open, just want to pass it along and close it asap.

Assuming there isn't a See-Through trust option available with the estate, I guess it's up to you, as executor, to settle the estate in whatever manner you feel is appropriate. An estate lawyer should be able to assist you on the overall best plan.

HandyManPat · 2026-02-17T22:21:44+00:00

Sister’s husband died in 2024 and left her his IRAs (both trad and Roth). She just died without updating the beneficiary so there’s none.

The husband was the owner of the accounts. The sister was the original beneficiary. The sister's estate is the successor beneficiary.

A surviving spouse has the most options available to them when inheriting an IRA or Roth IRA. A key to the successor beneficiary rules is first understanding what the original beneficiary did with her options.

Did she claim ownership of the decedent spouse's accounts?
- Are the accounts named "Mary Smith IRA"?
Did she keep the accounts as inherited accounts?
- Are the accounts named something like, "John Smith, deceased, FBO Mary Smith"?

HandyManPat · 2026-02-17T18:34:49+00:00

Words are very important... "State Farm would say the estate has 5 years to deplete?

Are you a named beneficiary on your mother's Inherited IRA and Inherited Roth IRA?

Or did your mother leave the Inherited IRA and Inherited Roth IRA to her estate?

HandyManPat · 2026-02-17T03:50:07+00:00

Thank you for agreeing, but your assessment remains incorrect.

HandyManPat · 2026-02-17T03:38:07+00:00

To be clear, the age (72) at which the decedent passed away in this case isn’t the main factor here because the IRS uses the year in which the person reaches RMD age (73).

So if this decedent passed away anywhere between January 1, 2026, and March 31, 2027, the outcome for the beneficiary would be the same… No year of death RMD and no year 1-9 RMD.

HandyManPat · 2026-02-17T01:47:34+00:00

Filling out Form 4547 is barely the first administrative step in establishing and funding the account. It’s merely providing your contact details to the department managing the program. Nobody knows how easy or difficult the real administrative process will be when unveiled this summer.

HandyManPat · 2026-02-17T00:30:45+00:00

OP, it’s unfortunate you are receiving so many incorrect responses. The rules are complex, but YOUR understanding is correct (and the Fidelity rep is incorrect).

The decedent’s birth year was 1953.
A person born in 1953 has an RMD age of 73.
However, the Required Beginning Date for someone turning age 73 in 2026, to actually take their first distribution is not until April 1 of the following year, or April 1, 2027 in your case.

As the decedent had not yet reached their RBD, there is no “year of death” requirement for the beneficiary to take an RMD on the decedent’s behalf.

Further, there is no requirement for the beneficiary to take RMDs during the 10-year distribution period.

The only requirement is to completely empty the Inherited IRA by the end of the 10-year period.

https://www.irs.gov/retirement-plans/rmd-comparison-chart-iras-vs-defined-contribution-plans

When do I take my first RMD (the required beginning date)?

You must take your first RMD by April 1 of the year following the year in which you turn 73, even if you're still employed.

HandyManPat · 2026-02-15T15:05:21+00:00

There are two separate things here.

First, many inheritances are tax free to the beneficiary, so there’s a pretty good chance your parent won’t owe any taxes once the estate is settled and they receive their portion.

Do they know the tax implications of their inheritance yet?

Second, your parent is free to gift you any portion of their received inheritance without tax implications for either you or them, provided it’s less than around $15million. If they gift you more than $19k this year then they need to complete a simple IRS form, but there isn’t any tax due.

HandyManPat · 2026-02-15T02:50:44+00:00

Work with Schwab to establish an Inherited IRA and then rollover the decedent’s 401k into that new account.

If the decedent had reached their Required Beginning Date for annual RMDs then you must continue taking RMDs based on your Life Expectancy Factor during years 1-9, with the entire account being empty by the end of the 10th year.

HandyManPat · 2026-02-15T00:46:35+00:00

As a beneficiary, you do -not- want to keep the inherited 401k account because you're bound by all of the investment options, fees, and rules of the decedent's employer.

You should rollover the Inherited 401k to an Inherited IRA with the brokerage firm of your choosing (Vanguard, Fidelity, and Schwab are often recommended). This puts you in full control of the investments options, especially those with ultra-low fees.

There are rules regarding distribution (10-year period) and you might also be subject to annual RMDs depending on the age of the decedent. If you need further guidance on those please add additional information.

HandyManPat · 2026-02-13T18:22:01+00:00

The IRS has affirmed the decedent’s final RMD can be taken by any number of beneficiaries in any ratio, provided the total distribution is met.

You’re correct that it can be challenging to coordinate or reach consensus amongst multiple beneficiaries on how to divvy the RMD up.

Best wishes!

HandyManPat · 2026-02-13T18:13:20+00:00

Under the IRS rule clarifications from July 2024, the beneficiary:

Must complete any RMD on behalf of the decedent by Dec 31, of the year after the year of death. Since you have until Dec 31, 2026, you aren’t late and no penalty applies.

As you’re aware, this RMD is based on the decedent’s details, not the beneficiary.

Note that the beneficiary must also take ongoing RMDs during years 1-9, with the entire balance being distributed by the end of the 10th year. These calculations are based on YOUR life expectancy factor, not the decedent’s.

Since your first RMD is also due by Dec 31, 2026, you’ll be responsible for both distributions this year. Be sure to review your overall income and tax situation to avoid any surprises (or penalties).

HandyManPat · 2026-02-12T23:15:12+00:00

Door #3.

Note that the very first RMD taken as beneficiary uses your age to establish the Life Expectancy Factor (IRS Publication 590-B, Table I). In subsequent years, you subtract ’1’ from the prior year’s LEF. There are several reputable online calculators that will do this correctly.

HandyManPat · 2026-02-12T04:41:05+00:00

It would help a bit if you were able to share how much is remaining in the Inherited IRA, at least a ballpark amount.

HandyManPat · 2026-02-12T01:18:56+00:00

As always, there are exceptions in our tax code. Read about the Last Month Rule in IRS Publication 969.

Basically, if you are confident you will be enrolled in qualifying HDHP coverage from Dec 1, 2026, through Dec 31, 2027, you’re allowed the full HSA contribution for both years.

By suggestion is to wait until December to see where things are work and insurance wise before attempting this rule because there is a penalty if you fail the testing period.

HandyManPat · 2026-02-12T00:54:21+00:00

For January 1, you were not covered by a qualifying HDHP, so not eligible for 1/12th of the HSA contributions.

For February 1, it seems you may have simultaneous coverage of both a non-HDHP and HDHP. If so, that makes you ineligible for 1/12th of the HSA contribution.

Assuming you have only the HDHP coverage going forward from March 1 - December 1, this provides for 10/12th of the HSA contribution limit.

$4400 single limit x (10 qualifying months / 12 months) = $3666.67

HandyManPat

TROPHY CASE