My understanding is that a Roth IRA can be inherited and the U.S. government doesn't put an inheritance tax on it.
Does that also apply to a Roth 401(k)? In other words, if I died, would my children inherit my Roth 401(k) without that 401(k) facing an inheritance tax?
Well, no.
True, a Roth has no income tax. The tax was already paid on deposit and no more tax due.
But, the Roth, IRA or 401, still might be subject to estate tax, as it is still part of the estate for state and federal estate tax purposes. Keep in mind, the federal estate exemption is high, over $11M per decedent. State varies, by, well, state.
Depending on whether the SECURE Act becomes law1, your children may be forced to withdraw from the Roth account faster than you might like. It changes the Required Minimum Distribution (RMD) rules.
As I understand it, the bill says a non-spousal inheritor must empty the account within 10 years of your death.
While not a tax per se, it makes your scheme somewhat less attractive.
1 As of this writing, the bill has passed the House of Representatives, but not the Senate.
2 As of this edit, the bill has passed the Senate as well.
