REASONS TO ROLLOVER INHERITED SPOUSAL IRA
In the forum, it has been discussed that if a spouse is over 59 1/2, it is in the best interest of the surviving spouse to transfer an inherited IRA from their spouse to their own IRA. It is because of the ability to use the Uniform Table vs. the Single Life Table for RMDs when they begin. That way, this would yield a smaller RMD, thus giving the IRA a chance to continue to grow for the future beneficiaries.
But, is there another good reason to do this? If the surviving spouse leaves it in the Beneficiary IRA, and passes, then the beneficiaries of the Inherited IRA would use the surviving spouse’s Life expectancy instead of their own? It may be better for the beneficiaries of the surviving spouse to be an original beneficiary of the spousal IRA? I am trying to clarify the benefits for a client.
Thank you in advance for all of the great contact and help on this forum.
Permalink Submitted by Alan - IRA critic on Fri, 2022-02-25 18:34
If a child beneficiary of a surviving spouse inherits either an IRA owned by the surviving spouse or an inherited IRA from which the surviving spouse is taking LE RMDs, the 10 year rule will apply to the child. However, if a sibling not more than 10 years younger than the surviving spouse were to inherit, they could stretch an IRA owned by the surviving spouse, but not one which the surviving spouse maintained as the beneficiary. Instead, the 10 year rule would apply. Therefore, the only benefit to a surviving spouse of maintaining an IRA inherited from the deceased spouse after 59.5 is when the surviving spouse is older than the decedent and is able to delay beneficiary RMDs until the year the decedent would have reached 72 and that year comes after the year the surviving spouse reaches 72 and must take owner RMDs.