Hi there! π I’m not a licensed CPA, but I can offer some general information. π
Firstly, I’m sorry to hear about your girlfriend’s loss. Inheriting a portion of her uncle’s Roth IRA, which amounts to $20,000 or 5% of the total, can provide her with a great opportunity. π°
Considering her current circumstances, it may be beneficial for her to explore the option of rolling over the inherited Roth IRA into her own brokerage account. This could potentially allow her to avoid immediate taxes and provide more flexibility in managing the funds. π
However, keep in mind that specific rules and regulations surrounding inherited IRAs can vary, and it’s essential for her to consult with a qualified tax professional or financial advisor to ensure the best course of action. They can provide tailored advice based on her individual situation and help her navigate any potential contribution limits. π
Given that she is a student with limited income currently, she might consider selling the inherited assets. If the proceeds are within the standard deduction amount, she may not have to pay any taxes upon liquidation. It’s important to evaluate the tax implications and potential benefits of this option thoroughly. π‘
Ultimately, discussing her options with an experienced professional is highly recommended to ensure she makes an informed decision that aligns with her long-term financial goals. π
I hope this helps, and best of luck to your girlfriend as she embarks on her teaching career! π
>Roth IRA
What taxes?
>reinvest into her own account?
This is still a good idea though.
She opens an inherited Roth IRA and sets the distribution. Because Roth IRA is good, she should keep the money in there as long as possible, so basically a lump sum in December 2033. That maximizes time to grow without taxes.
After that, itβs her money to do with as she pleases. At that point the wikiβs advice on windfalls applies. She can use it to fund her own accounts, and itβs treated like any other money sheβs had sitting around.
No experience in this but you got me curious:
>An inherited Roth IRA once provided benefits for a lifetime to beneficiaries. Under the rules of the SECURE Act and SECURE Act 2.0, only spouses, minor children of the deceased, those who are disabled or chronically ill, and those who are not more than ten years younger than the deceased, such as a sibling can hold inherited funds in a Roth IRA account longer than ten years.
>Non-qualifying heirs who inherit a Roth IRA must distribute all the assets in the account within ten years of the original ownerβs death.
https://www.investopedia.com/roth-ira-beneficiary-rules-4770500
Probably want a second opinion but source is solid.
>Is there a way to rollover an inherited Roth IRA into her brokerage of choice to avoid taxes right now and not have to worry about it?
Your gf can withdraw the $20k from the inherited Roth IRA without paying taxes. [According the IRS](https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary#:~:text=Withdrawals%20of%20contributions%20from%20an,the%20time%20of%20the%20withdrawal.), as long as the Roth IRA has been open at least 5 years:
>Withdrawals of contributions from an inherited Roth are tax free. Most withdrawals of earnings from an inherited Roth IRA account are also tax-free. However, withdrawals of earnings may be subject to income tax if the Roth account is less than 5-years old at the time of the withdrawal.
>However, then my thought is sheβd be subject to the contribution limits of her own Roth and couldnβt reinvest it all into a Roth right away.
Yup, as long as she has earned income, she can contribute $6,500/year to her own Roth IRA.
Or she can withdraw the $20k (tax-free, assuming her uncle opened the Roth IRA before 2018) and dump it into her own taxable brokerage account.
Or she can wait 10 years to withdraw the funds, letting it grow tax-free, and withdraw it tax-free. Again: that’s the beauty of a Roth account.