Spousal IRA Rollover Follow Up Questions (4)

Submitted by Vivek Chaturvedi on Wed, 2016-06-01 11:47

Mom (66 yo) inherited two 401k AND a lump sum death benefit from Dad (69 yo; recently passed away). Neither parent had any Traditional IRA accounts. 100% of both 401k are Traditional.

401k #1 – Mom prefers to stay in plan as is.

401k #2 – Mom wishes to rollover the account to a Traditional IRA with Vanguard (not yet opened).

Death Benefit Lump Sum: 100% was rolled over to a new Traditional IRA with TIAA-CREF.

1. RE: 401k #1:Our understanding is RMD are based on when he would have turned 70.5 but based on Table III Uniform Lifetime. Is that correct?

2. RE: 401k #2: Our understanding is RMD start when Mom turns 70.5 and her life expectancy. Is that correct?

3. We believe there is no issue having these two 401k separate, one based on dad age and one based on mom. Is that correct?

4. Although cumbersome, we just want to me sure there is no tax issue with opening two separate traditional IRA in the same year (one for 401k #2 rollover to vanguard, and other for death benefit rollover to TIAA). Since these are rollovers we do not believe this to be an issue.

Thanks,

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Permalink Submitted by Alan - IRA critic on Wed, 2016-06-01 20:40

401k RMD is determined from Table I, as surviving spouse cannot own the 401k and must take RMDs as the beneficiary. For the year when Dad would have reached 70.5, if rolled over to her own IRA, then her RMDs would be smaller as Table III would apply as IRA owner.
Correct. Table III applies here. FIrst RMD can be delayed untll 4/1 following year she turns 70.5 if desired, but would then have to take out 2 RMDs in that year.
Correct, but maintaining the inherited 401k will result in larger RMDs from that account per Table I.
She can have as many IRAs as she wishes, although it is not clear why there will be two rollover IRAs rather than combining into one.