IRA Owner Deceased Just Prior to RMD
IRA owner turns 72 this year so has RMD amount to take, but passes before taking it. Can spouse take over IRA and not take RMD this year, or all the way until she turns 72? Or does RMD for this year only have to be taken?
Permalink Submitted by Alan - IRA critic on Tue, 2022-03-22 15:49
If owner reaches 72 this year, the RBD is 4/1/2023. When passing prior to RBD, there is no year of death RMD that needs to be taken by anyone.
A sole spousal beneficiary does not have to take a beneficiary RMD until the year that the deceased spouse would have reached 72 if the deceased spouse was born after 6/30/1949, which is the case here. Then, if she forgets or otherwise fails to take out the beneficiary RMD by the end of the year he would have reached 72, she defaults to ownership of the IRA for that year, which reduces or eliminates her late beneficiary RMD.
Permalink Submitted by Brian Kuhn on Tue, 2022-03-22 16:21
Thanks I’m sorry I’m not quite understanding the second bullet point. She wouldn’t be failing or forgetting she would just be choosing to not take something that’s not required it appears. So even though there was an RMD this year, she can take over the IRA and not be required to take anything for another few years since she is younger?
Permalink Submitted by Brian Kuhn on Tue, 2022-03-22 16:21
Thanks I’m sorry I’m not quite understanding the second bullet point. She wouldn’t be failing or forgetting she would just be choosing to not take something that’s not required it appears. So even though there was an RMD this year, she can take over the IRA and not be required to take anything for another few years since she is younger?
Permalink Submitted by Alan - IRA critic on Tue, 2022-03-22 16:43
Yes, she can assume ownership and avoid RMDs until 72. In this situation, because the owner passed prior to RBD, there is no year of death RMD required by the beneficiary. The second bullet point just expands the explanation to what will occur in 2023 when the surviving spouse has their first beneficiary RMD (as opposed to the year of death RMD of the decedent). Come 2023, this younger surviving spouse would have to take a beneficiary RMD if she did not assume ownership, but there is a default rule that states that if she does not take that RMD or assume ownership, she defaults to ownership status automatically. While becoming the owner next year would not require RMDs if she was not yet 72, it also means that if she happened to be under 59.5 and needed distributions, then she would face a 10% penalty. Therefore, this rule could either work in favor of the surviving spouse in reducing RMDs, or against her if she needed to take distributions as the owner before 59.5 and therefore would incur a penalty. So this is something she needs to be mindful of come 2023 depending on her age.