Inheriting a Parent's Roth IRA: Tax-Free Withdrawal Options

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Inheriting a parent’s Roth IRA usually means you can take the money out without owing federal income tax, as long as the account has met the five-year holding rule. What you cannot do is keep it forever. Most adult children who inherit a Roth IRA must empty it by December 31 of the tenth year after the parent’s death. In the years before that deadline, there is no required withdrawal schedule. Minor children and beneficiaries who are disabled or chronically ill get more flexible timing.

Which beneficiary category you fall into

The SECURE Act of 2019 sorted beneficiaries into groups, and your group sets the withdrawal timeline. Because a Roth IRA owner never has to take lifetime RMDs, a parent who dies holding a Roth is always treated as having died before RMDs began. This keeps inherited Roth rules simpler than inherited traditional IRA rules.

Designated beneficiary: the 10-year rule

A designated beneficiary is a person named on the account’s beneficiary form, the category most adult children land in. For deaths in 2020 or later, the whole balance must be withdrawn by December 31 of the tenth year following the year of death.

Inside that window you choose the timing: some money every year, nothing for nine years and everything in year ten, or a full cash-out in the first month. Unlike some heirs of traditional IRAs, you face no annual withdrawals in years one through nine.

Eligible designated beneficiary

Some beneficiaries can stretch withdrawals over their own life expectancy, using the IRS tables in Publication 590-B. When the original owner is a parent, the groups that matter are:

• A minor child of the account owner. The child takes life expectancy distributions until age 21, the age the final IRS regulations use regardless of state law. The 10-year rule then applies, so the account must be emptied by the end of the tenth year after the child turns 21.
• A beneficiary who is disabled or chronically ill under the IRS definitions. This status lets the beneficiary take distributions over their life expectancy.
• A beneficiary not more than 10 years younger than the owner. This rarely fits a child, but it can apply when a sibling or partner inherits.

A surviving spouse is also an eligible designated beneficiary and has extra options covered in the FAQ.

The stretch option is a choice, not an obligation. An eligible designated beneficiary can still withdraw faster, including taking the full balance as a lump sum.

When the estate is the beneficiary

If your parent named no beneficiary, or named the estate, the account usually passes through the estate. In that case there is no designated beneficiary. For a Roth IRA, the account must then be emptied by the end of the fifth year after the year of death. Some trusts can qualify for designated beneficiary treatment if they meet IRS “see-through” requirements. Whether a particular trust qualifies is a question for the trust’s attorney or administrator.

Are inherited Roth IRA withdrawals taxable?

Inheriting the account is not a taxable event: you owe nothing when the money moves into an inherited Roth IRA. Whether a withdrawal is taxable depends on the five-year rule.

The five-year rule carries over from your parent

A Roth distribution is qualified, and therefore fully tax-free, if it is made after the owner’s death, which an inherited account automatically satisfies, and at least five tax years after the owner first funded any Roth IRA. The clock starts on January 1 of the tax year of the owner’s first contribution. You inherit your parent’s clock and do not start a new one.

If the five years are not yet up, Roth ordering rules decide what comes out first:

1. Regular contributions your parent made. These always come out tax-free.
2. Conversion amounts, in the order they were converted.
3. Earnings. Earnings are taxable as ordinary income only if withdrawn before the five-year period ends.

If the five years are nearly up, waiting usually costs nothing. You can withdraw up to the contribution total right away, then take the earnings after the five-year date passes.

No 10% early withdrawal penalty

The 10% additional tax that normally applies to IRA distributions before age 59½ does not apply to distributions made because of the owner’s death. A 30-year-old who inherits a Roth can withdraw without that penalty. Any earnings taxed under the five-year rule are still taxed as income, though.

Estate and inheritance taxes are separate

The Roth’s income tax advantage does not remove the account from your parent’s estate. Its value is included in the gross estate for federal estate tax, which matters only for estates above the federal exemption amount. A few states also levy their own estate or inheritance taxes with different thresholds. Any estate tax is generally paid by the estate, not by you on each withdrawal.

How to set up an inherited Roth IRA

To keep the tax-free growth instead of taking a lump sum, the money must go into an inherited IRA, also called a beneficiary IRA. Many brokerages and banks that offer regular IRAs also offer these accounts.

1. Contact the custodian holding your parent’s Roth IRA and ask for its beneficiary claim process. You will typically need a certified death certificate and your own identification.
2. Open an inherited Roth IRA at that custodian or another one, titled to show both names, for example “Parent’s name, deceased, for the benefit of your name.”
3. Move the assets by direct trustee-to-trustee transfer, not a check made out to you. A non-spouse beneficiary cannot do a 60-day rollover, so a distribution paid to you cannot be put back.
4. Name your own beneficiaries on the inherited account. If you die before it is emptied, they inherit your remaining schedule, not a fresh one.
5. Record your deadline based on your beneficiary category and the year of death.

You cannot contribute to the inherited account or roll it into a Roth IRA in your own name. If several siblings are named, each should set up a separate inherited IRA for their share. Splitting the account by December 31 of the year after death lets each beneficiary apply the rules that fit their own status.

Examples

Example 1: Adult child with a long-standing account

A parent opened a Roth IRA in 2012 and died in 2024. Their 48-year-old daughter is the named beneficiary. She is a designated beneficiary, so the account must be emptied by December 31, 2034. The five-year rule was met long ago, so every withdrawal, earnings included, is tax-free. She can take nothing until 2034 and empty the account that year with no annual RMDs along the way.

Example 2: A newer Roth account

A parent made a first Roth contribution for tax year 2022 and died in 2024, leaving $14,000 of contributions and $2,000 of earnings. The five-year period runs from January 1, 2022, so it ends on January 1, 2027. The son can withdraw up to $14,000 at any time without tax. Earnings withdrawn before 2027 are taxable as ordinary income, though not penalized. From 2027 on, the full balance is tax-free, well before his 10-year deadline at the end of 2034.

Example 3: A minor child

A 12-year-old inherits a parent’s Roth. As an eligible designated beneficiary, the child takes annual life expectancy withdrawals. A guardian or custodian usually manages these for the child. When the child turns 21, the 10-year rule begins, and the account must be empty by December 31 of the year the child turns 31.

What happens if you miss the deadline

A shortfall is subject to an excise tax of 25% of the amount that should have been withdrawn but was not. Under the SECURE 2.0 Act, the rate drops to 10% if the shortfall is corrected within the correction window. For a typical 10-year Roth beneficiary, the risk is any balance left after December 31 of year ten. Eligible designated beneficiaries taking life expectancy payments can also trigger the tax by missing an annual amount.

The IRS can waive the tax if the shortfall resulted from reasonable error and you are taking reasonable steps to fix it. You request the waiver on Form 5329, usually with a written explanation and after taking the missed distribution.

Choosing when to withdraw

Heirs of inherited traditional IRAs often spread withdrawals across the 10 years to avoid piling taxable income into one year. That reasoning mostly falls away with a qualified Roth, because the withdrawals add nothing to taxable income. Leaving the money invested longer gives it more time to grow tax-free, so waiting until late in the window is attractive for many beneficiaries.

Other factors can point the other way:

• You need the cash. If you would otherwise carry high-interest debt, withdrawing earlier may cost you less.
• The account is too concentrated. You can rebalance inside the inherited IRA without tax, which does not require a withdrawal.
• Waiting carries a deadline risk. A large final-year withdrawal leaves no room for a processing delay before December 31.

A qualified withdrawal does not count as income for federal tax, but the cash itself may matter elsewhere. For example, it can count as an asset on financial aid forms such as the FAFSA.

FAQs

The Bottom Line

Adult children who inherit a parent's Roth IRA can usually let the money grow tax-free for close to a decade before withdrawing it. Move the assets into an inherited Roth IRA by direct trustee-to-trustee transfer, confirm your beneficiary category and the five-year clock, and record your deadline. Waiting late in the window often makes sense, but leave time before December 31 of year ten to avoid the excise tax.