How does spouse “elect to remain a beneficiary”?
Owner passed at 65. Surviving spouse is 74. Does surviving spouse re-register into a beneficiary IRA and name himself as the beneficiary? Thanks in advance.
Jim
Owner passed at 65. Surviving spouse is 74. Does surviving spouse re-register into a beneficiary IRA and name himself as the beneficiary? Thanks in advance.
Jim
Permalink Submitted by Alan Spross on Fri, 2009-08-21 04:13
In this case the decision whether to maintain the IRA in beneficiary form or assume ownership depends on the individual circumstances. Here are the results of the two choices:
1) Continue in beneficiary form
RMDs do not have to begin until the decedent would have reached 70.5. This provides about 5 more years without RMDs on this balance.
Starting in the year decedent WOULD HAVE reached 70.5, RMDs will be lower if ownership is assumed than if survivor continues as beneficiary only
If survivor passes before RMDs must begin, he will be treated as the owner, and that will allow his successor beneficiaries a new stretch.
If survivor fails to take the beneficiary RMD by the end of the year the decedent would have reached 70.5, he is deemed to have assumed ownership in that year.
2) Assume ownership or roll it over to his own IRA
RMDs will then begin in the year following ownership assumption or rollover.
Obviously, Option 1 will provide more tax deferral, but also more complexity and tracking to be sure action is taken at the 5 year point.
Note that any basis from non deductible contributions in the decedent’s IRA passes to the survivor. Basis should transfer from decedent’s 8606 to survivor’s once ownership is assumed.