QUESTION:
I opened my first Roth IRA in 2017 and a second Roth IRA in December 2021. My current age is 71. I withdrew some funds from these accounts last year. For tax year 2024, I received a 2024 Form 1099-R for the 2017 Roth IRA account with a distribution code of Q and a 1099-R for the 2021 Roth IRA with a distribution code of T. That’s where the confusion is – different distribution codes. Having the 2021 Roth IRA for less than 5 years, and having received the Form 1099-R with a distribution code of T, I wanted to make sure I did not have to pay taxes on this distribution. Having the first Roth IRA for more than 5 years, is not the second Roth IRA also covered within that 5-year requirement period for withdrawals?
Thanks,
Ken
ANSWER:
Ken,
I didn’t need to read much beyond your first two sentences. You are over age 59½ and have had a Roth IRA (any Roth IRA) for over 5 years. End of story. Every distribution you take will be tax free. If you do any Roth conversions in the future, the converted dollars and earnings will be immediately available tax free. As far as Roth IRAs go, you never have to worry about taxes again for the rest of your life. Regarding the 1099-R codes, Code Q is used for a distribution from a Roth IRA when the custodian knows the Roth IRA owner meets the 5-year holding period and has reached age 59½. Such is the case with your 2017 Roth IRA. Code T is used for a distribution from a Roth IRA when the custodian knows you are over 59½, but is unsure if you have met the 5-year period. That is the case with your 2021 Roth IRA. All is in order. Based on the details you shared, nothing is taxable.
QUESTION:
I am 77 years old and take required minimum distributions (RMDs) from my IRA. Can I name my grandchildren who are seven and five years old as beneficiaries for my IRA accounts? If something happens to me, can they stretch RMDs over their life expectancies if they are still minors at the time of my death?
ANSWER:
You can name your grandchildren as your IRA beneficiaries. However, even though they are minors, they do not qualify as “eligible designated beneficiaries” (EDBs) for your IRA. Only EDBs are allowed to take stretch RMD payments over their full life expectancy, and only minor children of the IRA owner qualify for this EDB category. Since the grandchildren are not your children, they would be subject to the 10-year payout rule.
If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.
Roth IRA Distributions and Eligible Designated Beneficiaries: Today’s Slott Report Mailbag
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