Inherited IRA rolling to personal IRA
Hi,
Client set up an inherited IRA instead of a spousal IRA because she delayed and didn’t do an RMD when required by the rules for her IRA (she is 2 years older than him) and he wasn’t 70.5 yet. So we did a spousal so no RMD was required that year.
He would have turned 70.5 in 2016, so an RMD would be required by either the inherited or the individual IRAs. No longer an advantage to keep it as an inherited, so we want to roll it to a new IRA in her name.
I am thinking that we need to do an RMD for 2016 under the bene IRA, and starting in 2017 we would do the RMD based upon her age, not his.
Am I doing that correctly?
Permalink Submitted by Alan - IRA critic on Wed, 2016-07-13 00:46
Since husband would have reached 70.5 this year, an inherited IRA RMD would be due by year end. However, there is also a rule that if the surviving spouse does a rollover this year to their own IRA, they are deemed to have owned the IRA the entire year (Ref IRS Reg 1.408-8, Q 5). That means the RMD due for 2016 will be the lower RMD as the owner as long as the rollover is done after the year of death, which I think is the case here. Suggest taking the owner RMD first unless the owned IRA will be set up by direct trustee transfer. If funds are moved by direct transfer the RMD could be taken from the owned IRA no later than 12/31.