options for spouse IRA beneficiary

Submitted by Jason Frank on Tue, 2018-04-10 14:44

I am getting conflicting information from an IRA custodian compared to what I am reading on the IRS website.

If a spouse who is over 70 inherits an IRA from a spouse who is under 70, it appears on the IRS website that the surviving spouse can transfer to an inherited IRA and delay taking RMDs until the original account owner would have had to start taking them.

However, the custodian where the IRA is held is saying that if the money goes to an inherited IRA, distributions must begin the year following death. If someone could help to clarify this issue it would be greatly appreciated. Thank you in advance.



Submitted by John Jawor on Tue, 2018-04-10 15:07

the word ” inherited ” is this issue.  Just like if a spouse under 59 1/2 assumes the ira as her own, she would pay 10% penatly for early withdrawal from the IRA pre 59 1/2.  if she opens an inherited IRA, the 10% pre 59 1/2 withdrwal doesnt apply.  So spouse in your case would need to assume the IRA as her own, then her DOB would be used for beginning RMD date.  I think.  Certainly wait for ALAN on this one. 

Submitted by Jason Frank on Tue, 2018-04-10 15:19

I think you might have misinterpreted the situation.  In this case, the surviving spouse is OVER 70, and would like to delay RMDs until the original owner would have had to start (he was 66).  

Submitted by Alan - IRA critic on Tue, 2018-04-10 17:37

  • If the surviving spouse was the sole designated beneficiary, they can indeed delay beneficiary RMDs until the year the deceased spouse would have reached 70.5. Therefore, the inherited IRA custodian was misinformed, although they cannot force out an RMD anyway, so they can just be ignored.  The surviving spouse should plan on assuming ownership early in the year that the deceased spouse would have reached 70.5 because the RMD for that year would be changed from a higher inherited IRA RMD to a lower RMD using the Uniform Table. 
  • All that said, it may not always be the best idea to defer distributions so that they are concentrated in later years. And marginal tax rates will be lower until 2025 and likely will increase again in 2026 if not before. This decision is best made only after considering the entire tax situation of the surviving spouse. 

Submitted by Jason Frank on Tue, 2018-04-10 17:44

Thank you so much for your answer!  Your second point is a good one regarding whether it makes sense to defer until later.  I do have a question regarding this statement:”The surviving spouse should plan on assuming ownership early in the year that the deceased spouse would have reached 70.5…”  By “assume ownership,” do you mean switch it from an inherited IRA into her own?

Submitted by Alan - IRA critic on Tue, 2018-04-10 18:06

Yes. While the surviving spouse could take a distribution and roll it over to their own IRA account, that would use up the one available 60 day rollover for a 12 month period. Therefore, it is better to advise the custodian that they are electing to be treated as the owner of the inherited IRA. Then they can do a direct trustee transfer to another IRA without using up their one 60 day rollover. The current inherited IRA custodian may or may not support just changing the title on the inherited IRA to reflect ownership.

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