When is Surviving Spouse Over 70 Required to Take First RMD?

Submitted by Terry Murphy on Thu, 2016-05-26 20:10

My husband passed away March 4,2015 at 67. At first, I had the IRA worded as a Spousal Beneficiary because I was 70 and hoped to delay taking RMDs until my husband would have turned 70. In Feb. 2016, I opened a fixed annuity and decided to put the IRA in my name then. I was told that my first RMD would need to be made by Dec. 31,2016. No one told me that I needed to take the RMD before the IRA was rolled into my name. After researching, I feel that I made a mistake by not taking the RMD before I made the change. Could someone please advise me if I made a mistake and if it can be corrected. Also, do I base the RMD on the value of the IRA on Dec. 31,2015. Thank you for your advice.



Submitted by Alan - IRA critic on Thu, 2016-05-26 23:05

There was no mistake. The distribution from the inherited IRA was not an RMD because your husband would not have reached 70.5 by the end of 2016. Therefore, the full amount was eligible to be rolled over to your own IRA account. Further, since your own IRA had no account balance on 12/31/2015 you do not have to take an RMD from the IRA annuity in 2016. Your first RMD will be due by 12/31/2017 based on the 12/31/2016 IRA balance, although the first distribution you take in 2017 from the IRA annuity will apply to your 2017 RMD. Any  IRAs you have owned other than the annuity  would have a 2016 RMD due as usual.

Submitted by Terry Murphy on Fri, 2016-05-27 13:22

Thank you Alan for responding to my question. I have been so concerned and worried about penalties. Now I can relax.

Submitted by Terry Murphy on Sat, 2016-05-28 06:56

May I ask one more question? Would it be possible to supply me with the IRS regulations in case I need it? You are so knowledgable and I would not know how to locate the information. Thank you again.

Submitted by Terry Murphy on Sat, 2016-05-28 08:23

So sorry, to ask yet another question. If I understand correctly, eventhough I am already 71 and the IRA was put in my name in 2016, I won’t be penalized if I wait to take my first RMD in 2017? Will I have to make 2 RMD’s in 2017?Thank you again for your patience. I really appreciate your helping me.

Submitted by Alan - IRA critic on Sat, 2016-05-28 22:13

Here is Reg 1.408-8 Q 4 regardlng your ability to roll over the entire inherited IRA to your own when there is no RMD due for the inherited IRA:

Q-4. What portion of a distribution from an IRA is not eligible for rollover because the amount is a required minimum distribution?A-4. The portion of a distribution that is a required minimum distribution from an IRA and thus not eligible for rollover is determined in the same manner as provided in A-7 of § 1.402(c)-2 for distributions from qualified plans. For example, if a minimum distribution is required under section 401(a)(9) for a calendar year, an amount distributed during a calendar year from an IRA is treated as a required minimum distribution under section 401(a)(9) to the extent that the total required minimum distribution for the year under section 401(a)(9) for that IRA has not been satisfied. This requirement may be satisfied by a distribution from the IRA or, as permitted under A-9 of this section, from another IRA.  

Submitted by Alan - IRA critic on Sat, 2016-05-28 23:26

With respect to your second question, the following more complex IRS Reg deals with the RMD required for the year of the rollover to your own IRA from the inherited IRA:

Q-7. What rules apply in the case of a rollover to an IRA of an amount distributed by a qualified plan or another IRA?A-7. If the surviving spouse of an employee rolls over a distribution from a qualified plan, such surviving spouse may elect to treat the IRA as the spouse’s own IRA in accordance with the provisions in A-5 of this section. In the event of any other rollover to an IRA of an amount distributed by a qualified plan or another IRA, the rules in § 1.401(a)(9)-7 will apply for purposes of determining the account balance for the receiving IRA and the required minimum distribution from the receiving IRA. However, because the value of the account balance is determined as of December 31 of the year preceding the year for which the required minimum distribution is being determined and not as of a valuation date in the preceding year, the account balance of the receiving IRA is only adjusted if the amount is not received in the calendar year in which the amount rolled over is distributed. In that case, for purposes of determining the required minimum distribution for the calendar year in which such amount is actually received, the account balance of the receiving IRA as of December 31 of the preceding year must be adjusted by the amount received in accordance with A-2 of § 1.401(a)(9)-7. 

I believe the year you reached 70.5 was prior to 2016 although you did not clarify which calendar year that was. Therefore, the option to defer your first RMD does not apply as there was no RMD to defer for the year you reached 70.5. Your RMD for 2016 is based on the balance of your IRA on the prior 12/31 and you had no owned IRA on 12/31/2015. As the Reg indicates, since your own IRA received the rollover in the same year as it was distributed from the inherited IRA (2016), there is no adjustment made to the 12/31/2015 balance. With a 0 balance, you have no 2016 RMD, but you will have a 2017 RMD calculated on your 12/31/2016 IRA balance. Your RMD divisor is determined by the age you will have attained by 12/31/2017.

Submitted by Terry Murphy on Mon, 2016-05-30 00:31

I thank you so much for the help you have given me. You are very kind to take so much of your time to clarify this.

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