Spousal rollover from deceased spouse IRA
Husband just passed away this year, 2024. He was age 91 in 2024.
Surviving spouse is 80 this year; 2024.
Husband owned a TIRA =~ $2M.
RMDs (either as the owner or an inherited stretch) will be large.
A bank has opened an inherited (beneficial) TIRA account FBO surviving spouse.
Can you confirm if my understanding is correct:
As a surviving spouse, she is an eligible designated beneficiary. She could “stretch” from the inherited TIRA.
As surviving spouse, she must do stretch withdrawals starting in 2025 starting with her age in 2025 = 81 => 10.5 years LE factor; then minus 1.
She would be better off with a spousal rollover from deceased husband’s TIRA.
As the TIRA owner then, her RMD factor for 2025 when she is 81 = 19.4. This means RMDs “about” half of what they would be using the stretch LE factor for an inherited IRA.
Two questions:
- Can you think of any mathematical reason the bank recommended transferring the deceased husband’s IRA into a beneficiary IRA instead of a spousal rollover? She doesn’t need/want more income as a result of a larger stretch RMD withdrawal and she is older than 59 1/2.
- Can she “unring the bell?” If the beneficiary IRA for her benefit has been funded (the money has moved from the deceased husband’s TIRA to the beneficiary TIRA in her name) can she now do a custodian-to-custodian transfer to an IRA in her name from the beneficial IRA?
- Or could she as the beneficiary IRA owner send the money back to the husband’s TIRA at the bank custodian and then do a spousal rollover from the deceased husband’s TIRA account to her own TIRA?
Thank you in advance for any help you can provide.
Bob Wright
Permalink Submitted by Alan - IRA critic on Thu, 2024-05-16 19:59
1) That’s normal procedure even if the beneficiary wanted to take a full distribution, since almost all IRA custodians are limited to only one SSN per IRA account for 1099R reporting purposes.
2) She should now simply elect to assume ownership of the inherited IRA, but the 2024 RMD is that of her husband. If he did not complete it before passing, she should complete it this year. In 2025 she will use the Uniform Table and age 81, so her RMDs will be much lower as you indicated. There is no benefit at all for continuing in beneficiary status. Assumption of ownership is the preferred way to acquire ownership because it is non reportable on a 1099R or on her tax return and does not use up a 60 day rollover.
3) IRA custodians would not allow this transfer, but it would not be beneficial for the spouse anyway. The general term “spousal rollover” includes either assuming ownership as described above or taking a distribution and doing a 60 day rollover to her own IRA of the amount in excess of the RMD for the year. The latter would be reportable and use up the one 60 day rollover permitted in a 12 month period, so the election to assume ownership is the far better way to complete the spousal rollover.
4) If his RMD has not been completed, she can either take it from the inherited IRA before assuming ownership or from her own IRA after assuming ownership.
While her RMD next year will be much lower than his was, she will also be subject to the higher single tax rate.
Permalink Submitted by Robert Wright on Fri, 2024-05-17 12:38
Thank you Alan.