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I inherited a Roth IRA from a parent. I am a designated beneficiary but not an eligible designated beneficiary.
IRS Publication 590-B for 2022, Distributions that aren't qualified distributions, includes Roth conversion contributions made less than 5 years before the owner of a Roth IRA dies.
Is that non-qualified status locked in or can I hold those assets in an inherited Roth IRA until 5 years after the last conversion contribution then take them as qualified (tax-free) distributions?
I believe I can hold the assets until the 5-year period is satisfied then take qualified distributions.
The book IRAs, 401(k)s & Other Retirement Plans: Strategies for Taking Your Money Out, 15th edition, Twila Slesnick, Nolo, 2021, states the following about the 5-year rule for taking out investment returns on Roth contributions:
"If you die before the five years are up. If you die before satisfying the five-year holding period, your beneficiary must wait until you would have satisfied it, or the distribution will not be qualified."
Later in the section about Roth conversion contributions the book states:
"Furthermore, distributions of future earnings on converted amounts will be tax free as long as those distributions satisfy the five-year holding period and are qualified."
I believe the requirements for a five-year holding period are the same for both investment returns and conversion contributions after the original owner dies.
Additionally my financial advisor made some calls and reached the same conclusion.
