RMD correct chart for spousal inherited IRA
The question is what RMD table should be used for current year and future years when a spouse dies in the prior year and the living spouse takes over the deceased spouse IRA and qualified plans.
An 86 year old husband passes in December of 2020. He has multiple IRA and defined contribution pension plans. The funds are rolled over to the surviving spouse (age 85) in January of 2021. In rolling over the funds, the prior employer has paid out a very large RMD to the spouse as a result of the rollover. This RMD is based on the Table I (single life expectancy). I was under the assumption that spouses are allowed to inherit the funds as if they were her own, and therefore thinking that she only needed to take RMDs based on the Uniformed table III
The CPA is suggesting that too much was paid out as RMDs, and that the spouse should roll back into her IRA the “excess amount” over the table III value using her 60 day rollover provisions of the law. Before she does this we are looking for clarification if too much has in fact been paid out (Table I amount) or not. Furthermore, if the Table I value is correct for 2021 RMD, moving forward is she allowed to use the Table III value in future years, or is her entire IRA balance subject to the single life table for the rest of her life?
Permalink Submitted by Alan - IRA critic on Thu, 2021-03-11 22:54
A non IRA plan is subject to different RMD treatment for surviving spouses because a surviving spouse can only be treated as a beneficiary, not as an owner. To become an owner, the surviving spouse must distribute the Table I beneficiary RMD for 2021, and can then rollover the balance to an owned IRA and begin Table III RMDs in 2022 from the IRA.
For an inherited IRA, the RMD for 2021 depends on how the spousal rollover is handled. If surviving spouse elected to assume ownership, they are treated as owning the IRA the entire year, and could then take a Uniform Table RMD for 2021. On the other hand, if the surviving spouse were to take a distribution from the inherited IRA, the 1099R would be coded 4 (death distribution), and Table I applies. The key is whether the first distribution is from an owned IRA (Table III) or from the inherited IRA before ownership is elected (Table I).
What the CPA is recommending for the qualified plan distribution is incorrect because the Table I distribution is the correct RMD and no part of it can be rolled over.
At this age the surviving spouse should elect ownership of the inherited IRA since Table III will generate a far lower RMD than continuing as the beneficiary.