IRA Owner RMD
Client husband, age 67, has been diagnosed with terminal pancreatic cancer and we have been discussing how things will be for his wife. Wife will be 72 in 2021 on December 10th and has taken an RMD for 2021 from her IRA. Approximately 80% of the family’s investment assets are in the husband’s IRA.
Should wife assume the IRA as her own when the husband passes? If she does and husband passes away in 2022, wife will not have to take RMD for 2022 correct? She will begin taking an RMD on larger IRA balance in 2023 correct?
Otherwise, she could choose an inherited IRA. Does the 10 year clock apply for spousal beneficiary? I didn’t think so – so just want to confirm we should choose this option and she could delay the RMD on the inherited IRA until he would have been age 72.
Thanks so much in advance!
Permalink Submitted by Alan - IRA critic on Wed, 2021-12-01 21:49
You are correct regarding the RMD scenario if she were to assume ownership of the inherited IRA after his 2022 passing.
Or she could continue the inherited IRA as an eligible designated beneficiary (EDB) with no beneficiary RMDs until the year husband would have reached 72. If she then assumed ownership of the inherited IRA in that year, her RMD would be calculated using the Uniform Table, generating a lower RMD than the single life table.
Or because he passed prior to RBD, she could elect the 10 year rule, further deferring RMDs. In year 10, she could take a Uniform Table distribution which would be obviously less than the full balance, and therefore she would default to ownership status of the IRA with the Uniform Table distribution satisfying her RMD for year 10 as the owner. This is doubles the deferral time for RMDs than assuming ownership in the year he would have reached 72.