transferring spousal beneficiary IRA to a regular IRA
I’m in discussions with a prospect whose husband died about two years ago. He was in his mid 50s at the time of his death. His wife chose to roll his IRA into a spousal beneficiary IRA. In addition to the spousal beneficiary IRA, she has several individual IRAs spread out among different mutual funds, banks, brokerage houses, etc. The wife is pretty overwhelmed by it all and I am suggesting she simplify things a bit by consolidating the IRAs.
I understand that one of the main reasons why a spouse might choose a beneficiary IRa over rolling the deceased IRA into her own IRA is the availability of taking money from the beneficiary IRA penalty free prior to age 59 1/2. The wife has a significant amount of non-qualified assets that are available to her and won’t be needing to tap into the beneficiary IRA any time soon.
Here’s the question. As I said, I’m looking to simplify things a bit. Can the beneficiary IRA be rolled over or transferred into a regular IRA? If not, can it be reclassified as an IRA in the wife’s name and then combined with the other IRAs?
Thanks for the input.
Danny
Permalink Submitted by Alan - IRA critic on Mon, 2014-02-24 02:22
You are correct that the inherited IRA should be maintained in that form until she is 59.5 UNLESS she is totally sure that she will not need to take any distributions from it. If she is SURE of that, then she can roll the inherited IRA into her own IRA or into a new owned IRA in her name with no mention of the decedent. However, since she cannot take any money from her own IRAs without penalty before 59.5, if she is several years younger than that, perhaps she should play it safe and maintain the inherited IRA – just in case she needs some IRA money later on. I guess the risk here depends on how much non qualified money she has and if she can manage it without needing any IRA money for several years.