RMDs
Husband is 80 w/ RMDs of $98k. Wife is 78 w/ RMDs of $74k. Assume they take their RMDs quarterly and wife passes away Husband is primary beneficiary; 2 children are secondary, followed by grandchildren (in Trust) as tertiary. Couple resides in NJ. Given their estate plans, the IRAs make up the bulk of the estate and there should be no NJ estate tax upon the 1st to die – but would be under current law for the 2nd to die. I just want to confirm the following:
1. If Husband does not disclaim, he must take the wife’s remaining RMD for 2016 (another $56k in total).
2. If Husband does not disclaim but wishes to minimize RMD’s, wouldn’t he be better off rolling into his own IRA because the payouts under the Uniform Lifetime Table are lower than under the Single Life Table?
3. If Husband desires, he can partially disclaim (up to some amount he chooses) in order to maximize the assets passing absent NJ estate tax while having part of wife’s IRA go to the 2 children in their mid to late 50’s for purposes of having reduced overall family RMD’s (if husband does not need all of the wife’s IRA). In this case, if the disclaimer is done before all 2016 RMD’s have been taken from wife’s IRA, then the children would need to take the missing/required sums.
4. Since one of the 4 grandchildren (tertiary beneficiaries) has some special needs, and no special needs Trust has yet been established, it would not make sense for the children to disclaim to their children (the wife’s grandchildren) because 1/4 (or a partial if less) of her IRA would end up in conduit trust for the grandchildren w/ special needs. Since the conduit trust is referenced in the Beneficiary Designation Form and addressed in wife’s Revocable Living Trust, so it has yet to be established, can it be established for all 4 grandchildren but special needs language incorporated for the benefit of the 1 grandchild?
Thank you!
Jason
Permalink Submitted by Alan - IRA critic on Tue, 2016-04-26 17:49
Permalink Submitted by Jason Hochstadt on Tue, 2016-04-26 21:14
Hi Alan,Thanks for the reply. As a quick follow-up:1.For the spousal rollover, could the husband roll the funds into his own IRA? Is there any reason to keep the decased spouse’s IRA as a separate rollover (assume there is no reason for investment or fee purposes; also may be tied in to #2 below)?2. Just to confirm, when a spouse inherits an IRA as an Inherited/Beneficiary IRA, if they die BEFORE the original owner would turn 70 1/2, then the surviving spouse’s own beneficiaries can take RMD’s over their own life expectancies. In an instance such as the above, with the decedent spouse in her late 70’s and remaining spouse at 80, a rollover should be done ASAP to enable the remaining spouse’s IRA beneficiaries to take RMD’s over their life expectancies. Thank you. Jason
Permalink Submitted by Alan - IRA critic on Tue, 2016-04-26 22:05
Yes, surviving spouse could roll over the inherited IRA into their own IRA, either an existing or new IRA. No reason to keep the inherited funds separate. Re Q 2, you are correct. Prior to the requirement that the surviving spouse must begin beneficiary RMDs, the beneficiary of the surviving spouse will still get a life expectancy stretch if the surviving spouse passes. But after 12/31 of the year that the surviving spouse must take beneficiary RMDs. if they pass as the beneficiary their own beneficiaries are treated as successor beneficiaries and do not get a new stretch. Your final sentence is totally correct. Sometimes the default rule will bail out the successor beneficiaries, for example if the surviving spouse fails to take the full RMD required as beneficiary, they default to ownership status and as owners their own beneficiaries are treated as designated and not successor beneficiaries, so they do not lose the stretch. It is when the surviving spouse takes beneficiary RMDs in lieu of doing the rollover that the successor beneficiaries lose out on having their own stretch.