Timing Considerations

• To withdraw the interest earnings from a Roth IRA tax-free, the IRA owner must wait at least five years after the IRA was established. If the Roth IRA owner dies before the five-year period is up, the beneficiaries must wait five years from the establishment of the IRA to withdraw all proceeds of the account tax-free. If withdrawals are made earlier, only the earnings on the account are taxable, not the original deposits.
  
  

Spousal Beneficiary

• If the sole beneficiary of a Roth IRA is the spouse of the IRA owner, the spouse is allowed to treat the Roth IRA as if it was her own. As the owner of the IRA, no withdrawals are required. A spouse can elect to take withdrawals if she wants to or let the Roth IRA account continue to grow for the next generation of heirs.
  
  

Other Beneficiary Option One

• Non-spousal beneficiaries have two options for the withdrawal of Roth IRA assets. The first option requires that all money be withdrawn from the IRA no later than the end of the year, five years after the year the Roth IRA owner died. As an example, if the owner died in 2010, the beneficiaries would have until Dec. 31, 2015 to withdraw the IRA assets. The money can be withdrawn in any amount, on any schedule until that date.
  
  

Other Beneficiary Option Two

• If a beneficiary of a Roth IRA wants to use the account as an ongoing source of income, withdrawals can be set up based on the life expectancy of the beneficiary. If the lifetime distribution option is chosen, the first payment must be made from the Roth IRA no later than Dec. 31 of the year following the year of the Roth IRA owner's death. Payment amounts under this option must be based on the beneficiary's life expectancy so that the full IRA proceeds are paid out by the beneficiary's projected death.