RMD

Submitted by Dave Johnson on Tue, 2018-02-20 15:24

I have a client that inherited an IRA after the deceased spouse started taking RMDs.
He was 85 when he passed in 2017. He had already taken the RMD for 2017.

His spouse is older than he was. She is 87.
The IRA was transferred to a Beneficiary IRA FBO his spouse.

His 2017 RMD was around $17,000.00.

Now my BD is telling me her RMD for this IRA is going to be $43,000.00.

Can this be right?
Thank you
DJHNSN



Submitted by Alan - IRA critic on Tue, 2018-02-20 16:26

  • Need some more info – apparently husband passed in 2017, and his IRA was inherited by wife (your client). What was the balance of this IRA on 12/31/2017, and what will wife’s age be on 12/31/2018?
  • At this time your client should assume ownership of this inherited IRA so that she can use the Uniform Table for her 2018 RMD. That will lower the RMD considerably since IRS rules allow her to use the Uniform Table for the year in which she assumes ownership. She is treated as owning the IRA for all of 2018. Of course, she also should name her own beneficiary ASAP. If she already has her own IRA, after having the inherited one re titled as owner, she can transfer it into the IRA she already owned.
  • Another benefit of assuming ownership is that HER beneficiary will get a new stretch upon her passing instead of having to continue her RMD schedule as a successor beneficiary.

Submitted by Dave Johnson on Wed, 2018-02-21 15:05

Thank you for your information.12/31/17 value was $276,699.48. Date of death was 03/24/2017 and he had taken RMD in january of 2017. for tax year 2017.Beneificary, his wife, will be 88 on 10/31/2018.The account assets were put into a beneficiary ira for benefit of spouse on 04/24/17. Her benes are her 2 children. They would like to streatch. Thank you again for your help.Dave    

Submitted by Alan - IRA critic on Wed, 2018-02-21 16:00

I get ~ 43,921 as her RMD if she remained as beneficiary. However, if she elects to assume ownership of the inherited IRA she can use the Uniform Table for her 2018 RMD. As a result, her RMD is reduced to 21,787.36. In addition the reduction of future RMDs would be even more than the roughly 50% reduction she gets this year for assuming ownership. Some seniors tend to cling to the inherited IRA title because it includes the name of deceased spouse, but this is a costly mistake, especially for beneficiaries. With her election of ownership, each of her children will now get a stretch using their own ages. Therefore, election to assume ownership should be done ASAP. 

Submitted by Dave Johnson on Wed, 2018-02-21 16:31

Thank you,Alan-This is exactly what I needed to know.Dave

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