My client, age 85, died this year before taking his RMD. His wife is his beneficiary. My broker-dealer is saying that the procedure is to roll the decedent’s IRA into that of the surviving spouse and then to take the decedent’s RMD. I thought that we were required to take the decedent’s RMD before rolling his IRA into that of his surviving spouse. Who’s right?
The easiest way to handle this is to do a T-to-T transfer and then take care of the RMD. If we handle it that way, who’s life do we use for the calculation. The 85 year old decedent had not taken his RMD for 2014 and would have needed to withdraw 7.09%. His 81 year old widow would only have to withdraw 5.85%. If we use her life expectancy for the calculation, that would leave about 1.24% that the IRS doesn’t get to tax. We don’t want to offend the IRS.
The year of death RMD is always the same amount as the decedent was required to distribute, therefore 7.09%. The beneficiary age only affects RMDs for years after the date of death. Therefore, the 2014 RMD is the same whether the surviving spouse rolls the account over this year or not. And the RMD will be taxable to the surviving spouse whether the RMD comes out of the inherited IRA before rollover or from widow’s own IRA after rollover.
Permalink Submitted by Alan - IRA critic on Mon, 2014-03-24 23:16
You could both be right. If a check is made out to his wife, it includes the RMD and she can only rollover the amount in excess of the decedent’s year of death RMD. However, if a non reportable trustee to trustee transfer is done to her IRA and no check is made out to her, then the year of death RMD must be taken from the wife’s IRA. The IRS does not really care how the rollover is done as long as the RMD is distributed to the wife.