Consolidating Spousal Retirement Assets
A new client’s husband passed away (46 years-old) recently. His wife would like to consolidate and simplify assets as much as possible. He has a Thrift Savings Plan account and Contributory IRA that she would like to consolidate into a Beneficiary IRA as she is the primary beneficiary. Is there any reason not to combine those two assets at this time?
Permalink Submitted by Alan - IRA critic on Tue, 2024-09-03 16:20
Assuming that she is the sole beneficiary of each account, she could combine them into a single inherited IRA. Per Sec 327 of Secure 2.0 she is automatically treated as the owner for RMD purposes but is still the beneficiary for all other purposes. She will have no beneficiary RMDs until husband would have reached 75 but can take distributions as needed before then with no early distribution penalty. After reaching 59.5, she could elect to assume full ownership of the inherited IRA, but if she is much older than him and wanted to further delay RMDs she could wait until he would have reached 75.
To consolidate, after submitting the death cert to both plans and her personal contact info (SSN, address), she should first have the IRA retitled in beneficiary form and be very careful to avoid assuming ownership of the IRA. After this is completed, she should request a direct rollover of the TSP into the inherited IRA (again NOT to an owned IRA).