Spousal Inherited IRA rules under new SECURE Act 2.0
If the original IRA account holder dies at age 65 and her spouse is the sole beneficiary (age 75), what options does he have for receiving the account? He does not need the account for withdrawals and would prefer to delay any required minimum distributions. Can move the funds into an Inherited IRA, and then prior the required beginning date on that account transfer the funds to his personal IRA? My understanding (and it may be incorrect) is that an Inherited IRA has a faster distribution requirement once RMD’s start than does a regular IRA. Any clarity on the options under the new law would be very helpful!
Permalink Submitted by Alan - IRA critic on Wed, 2025-04-30 13:49
If the intent is to delay distributions, the account should be maintained as an inherited IRA until the year the decedent would have reached RMD age. If deceased spouse was born in 1960 or later, their RMD age would be 75. The surviving spouse would then assume ownership of the inherited IRA in that year and the Uniform Table would apply for that year and beyond. Of course, when those Uniform Table RMDs kick in at age 83 or 85, taxable income will spike from then on.
The new Secure 2.0 option of electing to be treated as the participant for RMD purposes is not beneficial in this situation because no beneficiary RMDs are required for the next 10 years. Therefore, this is option can be ignored as it is only useful for beneficiaries younger than the decedent.
Permalink Submitted by Josh Self on Wed, 2025-04-30 16:40
That is very helpful, Alan. The deceased spouse was actually born exactly in 1960, so that is good to know that the surviving spouse would be able to delay any RMD’s on this account for another 10 years if he were to keep it as an Inherited IRA. One further question…is the Uniform Table that would be applied to the Inherited IRA RMD at what would have been deceased spouse age 75 the same table that is normally applied to regular IRA RMD’s? If so, then it wouldn’t really matter whether the money is in his IRA or the Inherited IRA…the RMD would be exactly the same? Just making sure I’m covering all of my bases.
Permalink Submitted by Alan - IRA critic on Wed, 2025-04-30 18:19
Yes, the Uniform Table could be used once RMDs must begin, therefore the amount of the distribution would be the same whether the spouse assumed ownership or continued as beneficiary. The Secure 2.0 Regs indicate that if the owner passes prior to RBD (as is the case here), the election to be treated as the participant for RMD purposes is automatic so the spouse does not need to notify the custodian to make the election.
However, being treated as the participant does not make the spouse the actual owner for other purposes. Therefore, the beneficiary of the surviving spouse would be a successor beneficiary rather than a designated beneficiary and would have to continue the RMD schedule of the surviving spouse in years 1-9 of the 10 year rule. That’s a higher RMD than younger beneficiaries would be subject to, and the 10 year rule would be punitive for a beneficiary of the surviving spouse that could have been an EDB (eg disabled child or sibling not more than 10 years younger) had the surviving spouse elected to assume ownership of the inherited IRA.
Permalink Submitted by Josh Self on Thu, 2025-05-01 09:38
Thank you!