Spouse inheriting an IRA
A client recently inherited an IRA from her deceased husband. On her own, she either established herself as the owner, or rolled the value into her own IRA. She is now wanting to take distributions. Is she now able to be treated as a beneficiary and permitted (required) to take annual distributions?
Permalink Submitted by Alan Spross on Sat, 2008-06-07 05:07
Once she has assumed ownership, she can no longer elect to be treated as a beneficiary.
If she is under 59.5, that means that any distributions she takes will be subject to the early withdrawal penalty. For that reason, survivors generally maintain the beneficiary position until they are 59.5 and then roll the funds over to their own IRA.
RMDs must begin by her required beginning date just as if this was her own IRA all along. That date is April 1st of the year following the year she turns 70.5. If her husband was subject to RMDs and had not taken his full RMD for the year of his death, she must take that RMD ASAP.
She should be sure to name her own beneficiary for this account if it was not rolled into her own IRA, and in any event after the death of her spouse she should review all her beneficiaries. In addition, she should determine if her husband had any basis in his IRA from having made non deductible contributions. That information would be shown on Form 8606 on their tax returns in the last year he either took a distribution or made one of the non deductible contributions. Any unrecovered basis becomes hers, and would make her distributions less than 100% taxable.