Spousal beneficiary IRA

Submitted by Robert Smith on Wed, 2019-12-18 22:51

Spouse is sole beneficiary of deceased wife’s IRA. He is age 52. Can the distribution from the deceased wife’s IRA be split with part going to his IRA and part to a Beneficiary IRA? If it all goes to the Beneficiary IRA, can he move part of it to his IRA at any time? He wants to have access to some funds without the 10% penalty in case he needs money but does not want to put all of it there.



Submitted by Alan - IRA critic on Wed, 2019-12-18 23:56

  • Yes, the beneficiary can retain any portion as an inherited IRA and roll the rest to his own IRA. At any later date, he could roll any additional amount to his own IRA. At one time this was an all or nothing choice, but for several years now the IRS has clarified that the funds can be split between inherited and owned.
  • The IRS has also ruled that the one rollover limit per 12 months applies to spousal inherited IRAs as well as owned IRAs. Therefore, to avoid a rollover the so called “spousal rollover” should not be a rollover at all. The beneficiary should have the portion he wants to own transferred as a direct transfer to a new inherited IRA, then he should notify the IRA Custodian that he elects to assume ownership of that IRA. He could then do another direct transfer to the IRA he already owns if he has one. No reported rollover will have occurred in this process, and no 1099R issued.
  • Note that beneficiary RMDs do not begin until his spouse would have reached 70.5 (this will probably change to 72 per the Secure Act likely to become law by Friday.)  

 

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