Spousal beneficiary and Inherited IRA
I am 70 yrs old and my spouse is 59. My spouse is currently 90% beneficiary of my IRA and a step daughter is beneficiary for the remaining 10%.Assuming my wife survives me, can she roll over her 90% into her own IRA? Can she then make our two children equal beneficiaries of the combined IRA? When she dies, can our two children then set up an Inherited IRA account with their individual benefit share? Any advice would be much appreciated. Thank you.
Permalink Submitted by Alan Spross on Tue, 2011-03-22 17:21
Yes, your surviving spouse can roll over her 90% share into her own IRA and name any beneficiaries she chooses. She cannot assume ownership of the existing IRA since she is not the sole beneficiary, but rolling over her share is very simple. If she has not reached 59.5 she should take out any funds she needs before 59.5 since there is no penalty on an inherited IRA distribution. After 59.5 she should roll her share over ASAP.
Step daughter’s 10% share should be transferred directly to a separate account no later than 12/31 of the year following the year she inherits. She can name any successor beneficiary she chooses for her share and your surviving spouse cannot control who she names.
If your surviving spouse names children as her IRA beneficiaries, they will be able to use their own life expectancies for their RMDs. They need to create separate accounts by 12/31 following year of her death in order for each to use their own life expectancy for their RMDs. If they miss that deadline, then the life expectancy of the oldest will apply to both.
In summary, the answer to all your questions is “Yes”, with the exception that your wife cannot control who the step daughter names as the sucessor beneficiary for her 10% share.
Permalink Submitted by robert kosheff on Wed, 2011-03-23 18:11
Many thanks for your help.