Inherited IRA by surviving spouse

Submitted by Craig LeBouef on Fri, 2016-10-21 18:22

IRA owner died in May 2015 and had IRA at bank before taking his 2015 IRA RMD. Surviving spouse is primary beneficiary of deceased husband’s 2015 IRA RMD. As of October 2016 bank still has not transferred title of deceased husband’s IRA to surviving spouse’s IRA at bank due to supposed technical issues (she has dimentia and unable to sign paperwork and tell bank her beneficiaries).

Is there a deadline to transfer deceased husband’s IRA to surviving spouse (she is over age 70 1/2 and has been taking her own RMDs for years without incurring penalty, etc.?

And is deceased husband’s bank IRA RMD calculated based on his continuing life expectancy (even though deceased still titled in his name) or surviving spouse’s life expectancy (as if she technically owns his IRA)?



Submitted by Alan - IRA critic on Fri, 2016-10-21 20:25

  • Quite likely this RMD is the least of the problems for this surviving spouse. Not having a POA or conservator, or even a court appointed financial guardian leaves her unable to conduct important transactions. Until the bank accepts required paperwork, death certificate for husband etc, they must continue to treat the IRA as owned by the decedent. The surviving spouse cannot re titled the IRA, take distributions, select a successor beneficiary etc.
  • Nonetheless, if surviving spouse is the sole beneficiary of the IRA and fails to take a beneficiary RMD by 12/31/2016 (and if husband would have been 70.5), IRS default rules will make her the owner of the IRA even though the bank does not yet recognize her as such. That would reduce her delinquent RMD and her medical handicap would result in the IRS waiving any late RMD penalty if the waiver was properly requested on Form 5329.
  • There is no deadline for her to otherwise roll this over, so if it takes another year to untangle this mess she can eventually roll it over or have it re titled in the event she became the owner by default while this was hung up. Meanwhile the amount of the delinquent RMD is affected by whether she becomes default owner or not. If husband would not yet be 70.5, her beneficiary RMDs do not start until the year he would have reached that age.
  • Hopefully, there are no other IRA problems such as an automatic distribution plan under which checks are still being issued to the husband after his death.

Submitted by Craig LeBouef on Fri, 2016-10-21 21:27

Surviving spouse has her own IRA at Bank and at brokerage house for a total of 2 other than deceased husband’s at bank.  Both surviving spouse and deceased husband are in their 80s and have been receiving RMDs for years.  I assume all 3 IRA account values as of 12/31/15 can be added together to calculate surviving spouse’s RMD and IRAs can be aggregated and RMD taken from one not all 3?

Submitted by Alan - IRA critic on Fri, 2016-10-21 23:25

Yes, that would work. The IRS Regs indicate that if a surviving spouse acquires ownership of an IRA by assumption or default in a year after the year of death, they are deemed to have owned that IRA for the entire year. So even though the actual default would not take place until 1/1/2017, the surviving spouse would be deemed to have owned the IRA effective 1/1/2016 for RMD purposes. While a beneficiary RMD cannot be aggregated with owned IRA RMDs, since the IRA will be treated as owned retroactively for RMD purposes, the total RMD for all 3 accounts can be aggregated and satisfied without any distribution from the frozen account. It will not matter that the frozen account may sit there for a period of time in the decedent’s name, but for RMD purposes it is no longer the decedent’s. But it should actually be retitled as soon as the control issues are resolved.

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