inherited ira
a question for alan
I just want to make sure that I undertand the law:
Husband (68) dies, ira inherited by spouse (65)…she has her own IRA..she does a rollover to her name…ed slott indicates the IRS mandates for the STRETCH that she does not change the name on the IRA (keep the husband’s name), but just change the SS no. where does her name appear on the inherited IRA ??? Does she have to keep this IRA separate from hers?? At 70 1/2 do an RMD of the sum of the two??
Permalink Submitted by Alan Spross on Sun, 2011-04-24 23:33
If she did a rollover to her name, that means that she assumed ownership of the IRA or rolled it over to another IRA which she owns. The other option is to retitle the IRA showing her interest as a beneficiary, ie an inherited IRA. If she had the IRA titled in inherited format, it would read “Lisa Smith as beneficiary of James Smith” or “James Smith deceased, Lisa Smith beneficiary”.
Either way, she can stretch the IRA over her life expectancy, but as owner she can use the Uniform Table under which RMDs are smaller, ie the stretch is longer. If she titled it as beneficiary, she must use the single life table which is based on her life only. The uniform table assumes a joint life expectancy with another beneficiary 10 years younger.
In this particular example, there is no reason NOT to assume ownership since she is older than 59.5 and can take distributions without penalty. She can also delay RMDs until she is 70.5 and defer the first RMD until 4/1 of the following year.
There is also a default rule under which a sole spousal beneficiary that fails to take an RMD as beneficiary is automatically deemed to have assumed ownership. Taking a look how this would work using your example, if spouse titled the IRA as beneficiary and just left it alone, she is required to take an RMD no later than the end of the year her husband would have reached 70.5. That would be around the year she is 67, and if she fails to take the inherited IRA RMD by the end of that year, she is deemed to be the owner and cannot change it back to inherited status. As owner she does not have to take RMDs until age 70.5 as referenced above.
Once she owns the IRA, there is no reason not to combine it with other IRAs she owns. She can aggregate the RMDs over these IRA accounts in any manner, ie figure the RMDs separately and then take out the amount in any combination from the different owned IRAs. But if she elects to maintain an IRA in inherited format, she cannot aggregate her RMDs with IRAs she owns.
Not sure if this addresses your entire question.
Permalink Submitted by gerard noronha on Mon, 2011-04-25 10:46
thank you…it explained the situation…the point that the beneficiary status is the “inherited ira” compared to a rollover owning the ira hit home….gerry