IRA Owner Died Just Before 70 1/2 and RMD Implications

Submitted by Steve Blankenship on Tue, 2013-06-11 16:43

I have a client that died unexpectedly just before she turned 70 1/2. There was not enough time between her death and the time that she turned 70 1/2 to execute any changes to the account. The surviving spouse is listed as the 100% primary beneficiary and he is 66 so he would normally not be subject to making an RMD. Schwab just sent out a 5498 showing the RMD and I am assuming that they mailed the same to the IRS so I’m wondering what our options are. It would be preferable to delay taking RMDs because we are still in a high income situation and additional deferral would be a big help.



Submitted by Alan - IRA critic on Tue, 2013-06-11 17:12

  • There should not be any RMD due in this situation. Owner passed prior to her RBD, and therefore there is no year of death RMD.
  • For the following year, the surviving spouse should roll the IRA over to his own IRA and there would be no RMD for that year because the surviving spouse is not yet subject to RMDs. Surviving spouse is deemed to have owned the IRA for the entire year if he rolls it over at any time in that year.
  • If the surviving spouse maintains the IRA as the beneficiary rather than the owner, then there will be an RMD due as beneficiary since the deceased spouse would have reached 70.5. In this situation, Schwab would correctly indicate that an RMD was due as beneficiary since that is how the IRA is now titled. Note that if the (sole beneficiary) surviving spouse fails to take out the RMD as beneficiary, they automatically default to ownership status for that year, and they have no RMD due as owner.
  • Since there is no RMD required here, suggest that surviving spouse re title the IRA or roll it over to their own name. This will result in RMDs being delayed to 70.5 and also provide a better stretch provision for the designated beneficiary he names.


Submitted by Steve Blankenship on Tue, 2013-06-11 20:43

Alan,To complicate matters (possibly) I forgot to mention that the death occurred at the very end of 2012 so we are crossing years here as well.  Not sure if that matters.  Thanks for your reply on this.  Assuming that no RMD is necessary, I can only assume that Schwab sent a copy of the 5498 to the IRS and if so, what is needed to show the IRS to fix that for the client or do we need to have Schwab file an ammended version?



Submitted by Alan - IRA critic on Tue, 2013-06-11 21:01

Perhaps Schwab will amend the 5498 once client rolls over the account to their own IRA account. The 5498 Inst indicate that a 5498 is issued to the surviving spouse once the rollover is completed. However, if no new 5498 is issued, I would not worry about the IRS inquiring, but if they do all the client will need is a copy showing that the account was rolled over, and that would eliminate any RMD requirement for 2013 and until client reaches 70.5. 5498 forms are issued in May, yet a surviving spouse has the entire remainder of the year to complete the rollover. I doubt that many custodians amend a prior 5498 that no longer applies due to spousal rollover.



Add new comment

Log in or register to post comments