Spouse waits to rollover now faced with possible RMD based o
Prospective client ask: Husband died nov 2008, his birthdate nov 1939; she changed the spousal with correct wording to and left it as an inherited spousal IRA. Her birthdate is aug 1943
The company holding the ira told her that she has to take a RMD for 2010 because her husband’s 70 1/2 birthday was this year.
Is it too late to rollover the Ira so that she can use her birthday for the coming RMDs or is she stuck because she waited?
I believe she still has time.; if not can she take the RMD and still roll it over to her own to save RMDs for the 3 years going forward?
Permalink Submitted by Alan Spross on Mon, 2010-12-27 23:16
You are correct. She should just roll it over and is then deemed to have owned the IRA all year. Even by default, if she refused to take out the inherited IRA RMD, she is deemed to have assumed ownership and she does not have an RMD as owner.
Alternatively, if she does not want to debate with the IRA custodian over this, she can just take out what they say is her RMD and roll it over to her own IRA. But there is nothing she gains by maintaining this IRA as inherited. In fact, her successor beneficiary loses their stretch if they inherit after RMDs must have begun for the spousal beneficiary.
Permalink Submitted by Lucille Johnson on Thu, 2010-12-30 04:55
This statement is from a Dec 10, 2010 answer
“If no action is taken at all, the account is considered inherited, not owned. However, if an RMD required of the beneficiary is not taken, then the account by default is considered to have been assumed by the surviving spouse as owner. A sole surviving spouse does not need to start RMDs until the year the deceased spouse would have reached 70.5, so in some cases, the account could set there for years as an inherited IRA.”
Arethese answers congruent? especially the sentence … A sole surviving spouse does not need to start RMDs until the year the deceased spouse would have reached 70.5
Permalink Submitted by Alan Spross on Thu, 2010-12-30 19:14
In the actual year the decedent would have reached 70.5 (2010 here), the rules with respect to the surviving spouse are very confusing and the RMD requirement is also effected by the age of the surviving spouse.
The two statements do not conflict. Here is a summary of events:
1) Husband died PRIOR to his RBD. There was not RMD due for his year of death (2008)
2) Spouse was sole beneficiary, and titled the account as beneficiary. While all RMDs were waived for 2009, there would not have been one for her anyway because husband would not have reached 70.5 in 2009. He would have been 70.5 in 2010.
3) Now it’s 2010 and she has an RMD as beneficiary due prior to 12/31, however if she rolls over the account or what the custodian feels is the RMD, she is treated as having owned the account all year, and she has no RMD as owner since she is under 70.5. If she does not take the RMD at all when the year ends, then by default she has assumed ownership. In a nutshell she can then assume ownership by taking action and doing rollover OR doing nothing and becoming owner by default. And if the custodian insists on cutting a check that they say is the inherited IRA RMD, she can simply roll it over which will change the character of the check from an RMD to just a distribution. She has 60 days from date of receipt to roll a check over to her own IRA and still report it as a rollover on her 2010 return if the distribution was done in 2010.
And yes, these rules are particularly confusing in years the decedent would have reached 70.5.
Permalink Submitted by Lucille Johnson on Thu, 2010-12-30 19:51
alan-oniras
Thank you