Secure Act, Death of Spouse
If a 53 year old wife loses her 60 year old husband, does she have the option to take his IRAs, SARSEP and 401k and call it a “non-spousal” Bene IRA, so that we have 10 years to distribute it? The reason we are thinking of doing this is that we want to not have an RMD, but also have access to the money with a 10% penalty. The plan is to distribute out what we need to maximize a healthcare subsidy until 59.5 and then move it into her own IRA. Because she may work, we only want RMDs if absolutely necessary, which is why we prefer not to have the spousal option.
Here are my questions:
1. Can a spouse elect a non-spouse bene IRA?
2. If you elect a non spouse bene IRA, can you move it to your own IRA after 59.5 or will that not be allowed because you didn’t choose the spousal option and you will be stuck with a 10 year depletion schedule?
3. Are there any restrictions or nuances to moving a SARSEP at death, or can that just move into a bene IRA?
Thank you for your help here!
Permalink Submitted by Alan - IRA critic on Sat, 2021-07-03 17:26
A spousal beneficiary may elect the 10 year rule since death was prior to his RBD, but since she will have no RMDs until the year he would have reached 72, there is no need to make that election. Any distributions she does not will be penalty free from an inherited IRA. She could then assume ownership once she reaches 59.5, and will still not have RMDs until she reaches 72.
She is a surviving spouse, but no need to elect the 10 year rule since there are no RMDs until he would have reached 72. By that time she will have assumed ownership of the inherited IRAs.
The SARSEP is a TIRA account and can be directly transferred to another inherited IRA. All 3 plans could be transferred (by direct rollover for the 401k) to the same inherited IRA providing that she was the sole beneficiary of each of the 3 accounts.