RMD After Divorce
A married couple divorce in July of 2016. The husband age 72 is employed and has a balance of $1m in his 403(b) at his employer – he is not subject to an RMD and is still employed to this date. The 403(b) funds transfer in March of 2017 to the wife’s IRA (50%).
The wife is 73 years old.
The wife’s IRA balance on 12/31/16 is $0.
Is the wife subject to an RMD on the IRA that received the $500,000 during the calendar year of 2017?
Permalink Submitted by Alan - IRA critic on Tue, 2017-04-11 15:50
No. The first RMD for these funds will be in 2018 based on 12/31/2017 IRA balance. However, if the participant retires before the end of 2017 it will result in 2017 becomes participant’s first RMD distribution year. The direct rollover to the ex spouse’s IRA is considered a distribution with respect to the participant’s RMD obligation. If 40,000 is the participant’s RMD for 2017 based on the 1mm balance, then 40,000 of the 500k direct rollover would not be an eligible rollover distribution to the ex spouse and would become taxable. Ex spouse would end up with a tax bill for 40,000 on line 16b of Form 1040 and would have to remove 40,000 from her IRA as an excess IRA contribution with allocated earnings. Therefore, retirement this year would impact ex spouse more than the participant. See 1.401a(9)-8, Q 6 c) here: