Spousal Beneficiary

Submitted by Wendy Mommaerts on Mon, 2016-01-18 18:34

Was wondering….

If we have a client that currently has a spousal beneficiary and has begun taking RMDs in 2015; can our client move these funds into her own IRA or because she started the beneficiary RMD’s will she not be able to?

If she keeps it as a spousal bene and passes away, her beneficiaries will have to follow her RMD schedule decreasing by 1 each year

If she moves the bene IRA into her own and then passes away, her beneficiaries can then follow their own schedule decreasing by 1 each year



Submitted by Alan - IRA critic on Mon, 2016-01-18 19:03

  • A spousal beneficiary can roll the IRA over to her own IRA at anytime. If this is done in any year AFTER the year of death, the surviving spouse is treated as having owned the IRA the entire year, and therefore any RMD is reduced by moving from the single life table to the Uniform Table.
  • If the IRA owner passed prior to the RBD, a sole spousal beneficiary does not have to start RMDs until decedent would have reached 70.5. If the spousal beneficiary passes during this time, her beneficiaries can apply their own life expectancies. But if she passes while still taking beneficiary RMDs, her beneficiaries are treated as successor beneficiaries and must continue her RMD schedule. For this reason, when the surviving spouse can roll the inherited IRA over to her own without tax consequences including early withdrawal penalties, she should.
  • Finally, don’t forget the sole spousal beneficiary default rules, which can sometimes help save the stretch. If the surviving spouse fails to take a beneficiary RMD in the full amount as required, they default to ownership of the inherited IRA, and if they pass their own beneficiaries would then get a full stretch.

 



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