The Rules and Strategies When You Inherit an IRA From Your Spouse: This Week’s Q&A

This week’s Slott Report Mailbag looks into RMDs and spousal IRA beneficiaries. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. You can find one in your area here.

Question:

Hello,

I need to take my RMD (Required Minimum Distribution). I’m not currently working. I’d like to know if I can take my RMD and add it to my existing Roth IRA.

I tried looking this up on the IRS website and elsewhere, but no information referred to an existing Roth IRA, regardless if I am working or not.

Thank you,
Dale

Answer:

Hi Dale,

You cannot “add” your RMD to your Roth IRA. You can only convert IRA funds to a Roth IRA or make contributions from non-IRA funds to a Roth IRA. In order to contribute to a Roth IRA, even an existing one, the rules require you to have taxable compensation. If neither you nor your spouse are working, you cannot make a contribution to your Roth IRA because your RMD is not considered to be taxable compensation. You cannot convert your RMD to a Roth IRA because that is considered a rollover and RMDs cannot be rolled over.

Question:

I turned 70 1/2 years old on March 23, 2017 and am the beneficiary of my deceased wife’s IRA who died in 2000. I never converted it to my own IRA but am still the spousal beneficiary. The Charles Schwab IRA department told me I must take the RMD by December 31, 2017 by using the Single Life Expectancy Table which is double what the Uniform Lifetime Table would be.

My tax attorney says they are wrong since 590-B page 5 says I can treat it as my own as long as I do not take the required minimum distribution for a year as a beneficiary of the IRA. Who is right? Her birthday was February 17,1947 and she would have been 70 1/2 this year

Thanks,
DL

Answer:

Your answer will depend on what you want to accomplish. If you want to keep your wife’s IRA as an inherited IRA, you must take an RMD for 2017 calculated using the single life expectancy, just as Schwab is recommending. However, if you have decided that the time has come to treat this IRA as your own, then taking an RMD based on your age and the Uniform Lifetime Table (because you are also 70 ½ this year) will accomplish exactly that. This IRA will be treated like any other IRA you may have and RMDs will be required, that are usually calculated using the Uniform Lifetime Table. This would be a good time to move the inherited IRA funds into your own IRA to avoid any confusion in the future.