RMD from inherited IRA
My client age 54 is 1/3 beneficiary of her deceased husbands IRA. The other two beneficiaries are sons from previous marriage. Checks have been issued already to the two sons by the IRA custodian.
Had the husband lived, he would have turned 70 1/2 this year. He died 10 months ago. No RMDs have been taken. The wife’s 1/3 of the account has been retitled as a beneficiary IRA with her deceased husband’s name in the title.
If I read the course materials correctly, because she was not the sole beneficiary, she cannot delay RMDs. She must begin them this year.
Is that correct? And if she had been sole beneficiary, she could have kept the account intact until she, herself was 70 1/2? Is this correct?
Kathy
Permalink Submitted by Alan Spross on Thu, 2008-04-10 04:29
If she wishes to maintain the IRA in beneficiary status, she must take her RMD this year as a beneficiary. However, if she fails to take the RMD required as a beneficiary, she is deemed to have assumed ownership of the IRA since she is now the sole beneficiary on the account. A surviving spouse that assumes ownership is deemed to be the owner for the entire year as long as that year is after the year of her spouse’s death.
However, the problem with assuming ownership or rolling funds over to her own IRA is that if she needs funds prior to turning 59.5, she will incur an early distribution penalty (barring starting a 72t plan). Therefore, any funds she expects to need in the next 5 years should be kept in inherited status, with the appropriate RMS taken each year starting by 12/31/08 at the latest.