Does RMD still apply on Inherited IRA to Spousal IRA rollover?
Does the Required Minimum Distribution apply in the year that a person converts their Inherited IRA into a Spousal IRA? In this example, a wife Inherited an IRA from her husband when he passed away in 2013. She chose to create an Inherited IRA because she was under 59.5 at the time of his death and she needed funds from the account. She satisfied the 2014 RMD from the Inherited IRA.
Fast forward to 2015. Surviving spouse would like to move the money from the Inherited IRA into a Spousal IRA in order to delay the Required Minimum Distributions for 10+ years. She no longer needs money from the account and wants to defer income tax as long as possible.
Let’s assume she moves the money from the Inherited IRA to the Spousal IRA on March 3, 2015. Is she required to take a RMD for 2015 because the Inherited IRA was open for two months in 2015 or is she allowed to delay the RMD until she turns 70.5 because she moved the funds from an Inherited IRA into her own IRA by year end?
Thanks in advance for your help.
Permalink Submitted by Alan - IRA critic on Mon, 2015-03-02 19:18
The latter. For any year after the year of the IRA owner’s death, if the surviving spouse assumes ownership or rolls over the inherited IRA balance into her own IRA, she is treated as having owned the IRA the entire year. Therefore, the next RMD distribution year is the year she reaches 70.5.
Permalink Submitted by Eddie Holland on Mon, 2015-03-02 19:52
Thanks, Alan-iracritic. Do you have any IRS publications or other documents that substantiate your comments? I’ve looked at IRS Publication 590 and haven’t found anything so I just want to have verification. Thanks.
Permalink Submitted by Alan - IRA critic on Mon, 2015-03-02 20:16
Yes, it is not very clear in Pub 590, but see “Surviving Spouse” on p 8 of 590-B. This is derived from IRS Reg 1.408-8, Q&A 5:https://www.law.cornell.edu/cfr/text/26/1.408-8