RMD from 401k of deceased spouse
Client’s spouse (age 79) passed away in July 2024 and had yet to take his 2024 401k RMD of $20,000. The plan has updated the ownership to his spouse, also age 79. the plan requires the spouse move assets from the plan in 90 days.
I’m aware a 401k RMD must be taken from 401k and not an IRA but is there an exception in this case?
The wife would prefer to take the 401k RMD from her IRA once rollover from 401k plan occurs to avoid Federal tax witholding which 401k plan would require 20% Fed withholding.
Permalink Submitted by Alan - IRA critic on Sat, 2024-11-09 13:09
The 2024 year of death RMD must be distributed prior to the surviving spouse executing a direct rollover to their own IRA. The surviving spouse cannot satisfy this RMD from the IRA.
But the mandatory 20% federal withholding does not apply to RMDs because RMDs are not eligible rollover distributions. Therefore, the default withholding rate is 10%, and the surviving spouse could also decline withholding altogether.
There is a new rule that an RMD paid to a non spouse is subject to the 20% requirement, but this does not apply to spousal beneficiaries.