Permalink Submitted by David Mertz on Thu, 2015-07-09 18:47
The original question (subsequently deleted) asked for the amount of a surviving spouse’s RMD as beneficiary of her husband’s IRA since the surviving spouse never transferred the beneficiary IRA to her own name. The deceased owner was born in 1936 (I don’t remember if it was the first half or the second half of the year) and died in 2002 while the spouse beneficiary was born in 1937. One advisor had determined a divisor of 11.4 based on the surviving spouse’s age in 2015 [Edit: I thought that this was clearly incorrect, but Alan’s reply below corrected me on that, indicating that the sole spouse beneficiary recalculates each year] and another had determined a divisor of 8.2 based on the surviving spouse’s 20.2-year life expectancy in 2003 reduced by 12 (also incorrect, I think).
For a surviving spouse as sole beneficiary, since the husband would not have reached age 70½ until 2006 or 2007, I believe that the divisor should be based on the surviving spouse’s age in the husband’s age-70½ year, reduced by the number of subsequent years. [Edit: the following is incorrect since the sole spouse beneficiary recalculates each year instead of using the reduce-by-one method] If 2006 was the husband’s age-70½ year, the 2015 divisor would be based on the surviving spouse’s age-69 life-expectancy of 17.8 reduced by 9 to 8.8. If 2007 was the husband’s age-70½ year, the 2015 divisor would be based on the surviving spouse’s age-70 life-expectancy of 17.0 reduced by 8 to 9.0. With a 2014 year-end account balance of $86,153, that would make the 2015 RMD either $9,790.11 or $9,572.56, respectively, I believe.
(Also, it is assumed that the surviving spouse took distributions of all required amounts as beneficiary prior to 2015, preventing the account from having become an account owned by the surviving spouse by default.)
Permalink Submitted by Alan - IRA critic on Thu, 2015-07-09 20:30
I agree with DMx except that a sole beneficiary surviving spouse is allowed to “re calculate” their beneficiary RMD each year. This avoids the 1.0 divisor reduction each year as the beneficiary would re enter Table I each year after the first RMD in 06 or 07 for the new RMD divisor. This would result in a slightly lower RMD than the 1.0 non recalculation method.
Note that the original question presumes all beneficiary RMDs prior to 2015 met requirements. If any of these years fell short, the default rule results in the surviving spouse being treated as the owner instead of the beneficiary. If there was still a shortfall using Table III, then the shortfall would have to be calculated and distributed so a 5329 could be filed requesting a waiver of the 50% penalty. The 2015 RMD as owner would of course apply Table III as well.
Permalink Submitted by David Mertz on Thu, 2015-07-09 21:07
Ah, yes, I forgot that the sole spouse beneficiary recalculates instead of using the reduce-by-one method. Given that the spouse beneficiary recalculates, the 11.4 divisor that I thought was clearly incorrect was actually the correct divisor, so $7,557.28 would be the 2015 RMD.
The original question also indicated that the spouse beneficiary died in 2015, so as I understand it, the sucessor beneficiaries would pick up using the reduce-by-one method, reducing the 11.4 divisor by one to 10.4 for the successor benefieries’ 2016 RMDs and continuing to reduce by one for each subsequent year.
Permalink Submitted by Alan - IRA critic on Thu, 2015-07-09 21:46
Agree, successor beneficiaries would reduce the year of death divisor by 1.0 the following year and each successive year. This situation illustrates how a successor beneficiary is stuck with the RMD schedule of the designated beneficiary whereas if the surviving spouse had rolled this over as they should have done earlier, the current successor beneficiary would have been a designated beneficiary and been able to use their own life expectancy for RMDs.
Permalink Submitted by Alan - IRA critic on Thu, 2015-07-09 17:00
No post shown………..
Permalink Submitted by David Mertz on Thu, 2015-07-09 18:47
Permalink Submitted by Alan - IRA critic on Thu, 2015-07-09 20:30
Permalink Submitted by David Mertz on Thu, 2015-07-09 21:07
Permalink Submitted by Alan - IRA critic on Thu, 2015-07-09 21:46
Agree, successor beneficiaries would reduce the year of death divisor by 1.0 the following year and each successive year. This situation illustrates how a successor beneficiary is stuck with the RMD schedule of the designated beneficiary whereas if the surviving spouse had rolled this over as they should have done earlier, the current successor beneficiary would have been a designated beneficiary and been able to use their own life expectancy for RMDs.