RMDs
A client died within the last month and she was 68 years old. Her sole designated IRA beneficiary is her husband who is currently 72 years old. My understanding is that he has the option to wait until she would have been 70 1/2 before taking RMDs. He would do this by taking the account as an inherited IRA–#1 option. He also has the option to rollover the account as his own–#2 option. If i am incorrect please let me know.
In option #1, in roughly 3 1/2 years the husband would use the single life expectancy table and use the factor for each age, rather than reduce it by 1. In option #2 the husband would use the uniform life table and use the factor for each age and the first distribution must be taken next year. Is this correct?
Permalink Submitted by Alan - IRA critic on Wed, 2017-05-10 21:48
You are basically correct. Husband would not retain the account as inherited unless he wanted to push the RMDs back for 3 years, which would then make the RMDs larger after that. He would have to decide which is the better tax decision of the two. If he chose Option 1, he should assume ownership in the year she would have reached 70.5 because that would result in a smaller RMD as owner than as beneficiary, so he would never actually take the beneficiary RMD. In addition if he did not take ownership by the end of the year of the first beneficiary RMD, and then passed, his own beneficiaries would lose their stretch and have to continue his beneficiary RMD schedule.