Qualified Plan Spouse Bene to Inherited IRA?
Hello. I have a client who is 46 and was married to a 62 year old. The husband, age 62 died. The surviving spouse is the beneficiary and needs the Qualified Plan proceeds for on-going living expenses / support.
Can the surviving spouse move monies from the Qualified Plan to an inherited IRA (not spousal IRA) allowing her to take distributions that aren’t subject to the 10% early withdrawal penalty?
If not, it seems as though she can leave the balance of the funds in the Qualified Plan and take distributions and they would not subject to the 10% early withdrawal penalty?
Thanks.
Permalink Submitted by Alan - IRA critic on Thu, 2014-01-23 17:29
She could either take penalty free distributions from the plan or roll over the balance to an inherited IRA. The latter was approved by the IRS is PLR 2004 50057. RMDs as a beneficiary would be required in the year husband would have reached 70.5. She would be 54 then and the RMDs would continue until she reached 59.5 when she could roll the balance over to her own IRA and that would eliminate the RMDs for a few years.
Permalink Submitted by Matt Groome on Thu, 2014-01-23 18:25
Thank you for your response.
Permalink Submitted by BruceM on Fri, 2014-01-24 02:27
AlanIs there a 20% ER withhold if the survivng spouse elects the indirect rollover?BruceM
Permalink Submitted by Alan - IRA critic on Fri, 2014-01-24 03:08
Yes, good point. The distribution from the employer plan should be done by direct rollover to prevent having to replace mandatory 20% withholding. The rollover rules for a surviving spouse are the same as they would be for the employee.