Spousal Benef. & RMD
A surviving spouse, age 60, inherits their husband’s IRA but chooses to leave the account as a beneficiary IRA. The deceased husband would not have turned 70 1/2 until three years later, so the wife doesn’t take RMDs for three years. Now the wife is 63 and the deceased husband would have been 70 1/2 in 2010. If she leaves the IRA as a benenficiary IRA, how would she calculate RMDs? Based on her life expectancy from the Uniform Lifetime Table, based on the deceased husband’s life expectancy from the Uniform Lifetime Table re-calculated, based on the husband’s life expectancy from the Single Life table, term-certain, etc.? And what would be the starting point? The age he would have been this year, the age of the wife the year following his death?
Also, if the wife were to move the account into her own IRA, would she first have to distribute the deceased husband’s RMD for 2010? And if so, how would that RMD be calcualted?
Permalink Submitted by Alan Spross on Wed, 2010-10-27 22:47
The best decision here is to assume ownership and re title the IRA or roll it over to another of her IRAs. If a sole beneficiary surviving spouse assumes ownership in a year OTHER THAN the year of spouse’s death, the surviving spouse is deemed to be the owner all year, and being under 70.5 that means NO RMD for 2010. (See Surviving Spouse, p 35 of Pub 590).
Another benefit of doing the rollover is that her named beneficiaries can get a full stretch if she passed. Conversely, if she continued in beneficiary status after the end of this year, a year in which she must take an RMD as beneficiary, HER successor beneficiaries will be limited to completing her existing RMD schedule. Prior to year end, she is treated as the owner for purposes of her successor beneficiaries, but that ends on 12/31, after which she is treated as a beneficiary and NOT as owner. Accordingly, she should act to become the owner prior to year end.
If she does nothing, ie NOT take the beneficiary RMD and NOT overtly assume ownership, she is deemed the owner by default, and that would protect the full stretch for her beneficiaries. But rather than risking misunderstandings of this rule, it is best to simply act to assume ownership and be sure her designated beneficiaries are correct.
Now, to answer your question regarding her RMD if she insisted on continuing as beneficiary despite the above disadvantages, her RMD for 2010 would be based on Table 1 using her actual table divisor for her attained age in 2010. A sole spouse beneficiary does not reduce the divisor by 1.0 each year thereafter, they re check Table 1 each year for the next divisor.