IRA Spousal beneficiary

Submitted by John Bebee on Wed, 2015-02-18 15:53

1. Husband and wife have IRAs. Husband passes away with IRA at age 65 . Wife is older at age 72.
She stays as beneficiary of his IRA rather than rolling over to her own IRA.
He would have turned 70 ½ this year 2015.
Would she need to take an RMD based on her life expectancy first before doing a Rollover into her own IRA this year 2015?
Or if she rolls over this year 2015 no RMD?
Even if an RMD would be required for the year of rollover how would it be calculated with no prior 12/31 value to use for RMD calculation?

2.Slight change rather than doing a Rollover the living spouse just takes over/assumes the IRA of the deceased spouse in 2015. Would an RMD than be required by 12/31/2015 or not until 2016?
If RMD is required for 2015 what would be used for the prior year 12/31 balance since she has no 12/31/14 balance.



Submitted by Alan - IRA critic on Wed, 2015-02-18 17:45

  1. If she rolls the IRA over this year, she is treated as owning it the entire year. She would have to take the RMD as owner and not as beneficiary and the RMD would therefore be lower. The inherited account will have a 12/31/2014 balance on which to calculate the RMD. There is also a default rule stating that if a sole spousal beneficiary fails to take an RMD required as the beneficiary, they default to ownership at the end of that year.
  2. Assuming ownership would have the same result, having to take the same owner’s RMD for 2015 using 12/31/2014 balance of the inherited IRA. Of course, she can aggregate her RMD with any other IRA accounts she owns.

 

Submitted by [email protected] on Wed, 2015-02-18 21:51

alan, would there ever be an instance where the divisor is better under single life than the unified table?  Or is it always going to be better to treat as own, once RBD is met by both?

Submitted by Alan - IRA critic on Wed, 2015-02-18 23:31

The RMD would never be lower under the single life table if the single life table divisor is based on the beneficiary’s age. However, if the surviving spouse beneficiary is considerably older than an IRA owner who passes after the RBD, the RMD will be less for a period of time if the owner’s remaining life expectancy is used. For example, if the owner passes at 71 and surviving spouse is 85, the surviving spouse’s RMD will be lower as a beneficiary (16.3 vs 14.8) for the first 4 years. But because the single life table divisor is reduced by 1.0 each year, by the 5 th year (surviving spouse is now 90), the Uniform Table now produces the lower RMD( 11.3 vs 11.4) so ownership should be assumed at age 90 in this case. Note that the single life table can only be used if surviving spouse is the beneficiary and the Uniform Table only if ownership is acquired. Not acquiring ownership earlier can erase most of the stretch for successor beneficiaries of the surviving spouse, which is major drawback of applying this example.

Submitted by [email protected] on Thu, 2015-02-19 14:11

perfect.  thanks.

Submitted by John Bebee on Thu, 2015-02-19 19:48

Thanks,is there a particular cite that indicates that the inherited IRA 12/31/14 balance would be used when the spouse rolls over the beneficiary IRA to her own IRA- for the RMD calculation. Only reason I ask is that once rolled into her own IRA it is of course different than the beneficiary IRA. Just curious if there was specific IRS direction/example.   

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