Spouse Inherits IRA

Submitted by Mhotchkiss on Mon, 2022-11-14 17:57

Facts – spouse 1, age 64, dies this year (2022). Spouse 2, age 72 this year is sole primary beneficiary. Options for Sposue 2 as I understand –
1. maintain inherited IRA and no RMDs required until Spouse 1 would have turned 72. At that time, the RMDs would be based on Spouse 2’s life expectancy using Table I. Is that correct?
2. claim as their own. If they claim as their own this year, they are assumed to have owned the entire year and they would have an RMD required on the Spouse 1 IRA in addition to any on their own IRA. RBD is Apr1 of 2023 for all RMDs due on their combined TIRA totals. RMDs would be calculated using Table III.

Am I missing anything? – m



Submitted by Alan - IRA critic on Mon, 2022-11-14 18:41

  1. Correct, but if spouse 2 is the sole beneficiary and does not complete the beneficiary RMD in 2030, they default to ownership status. There is no benefit whatever in continuing to maintain the IRA in inherited status starting in 2030.
  2. No, if they assume ownership this year (year of death), they are not treated as the owner for the entire year. That rule does not start until the year after spouse’s death (2023).  For 2022 there is no RMD because deceased spouse passed prior to RBD. Table III RMDs would begin for spouse 2 in 2023 using the 12/31/2022 balance. 
  3. Spouse 2 might consider converting some portion this year with no RMDs, last year of filing jointly, and facing future higher marginal rates filing single. This will reduce future RMDs. If spouse wants to convert some, but also wants to delay RMDs for a year more years, he could convert directly from the inherited IRA account. While an inherited IRA cannot be converted by a non spouse, for a spouse the inherited IRA is not treated as such and the conversion can be done without using up a rollover.  

 

Submitted by [email protected] on Mon, 2022-11-14 20:14

Thank you.  Confused by your part 2 answer.  What does this mean in the IRS.gov site -Surviving spouse. If you are the surviving spouse who is the sole beneficiary of your deceased spouse’s IRA, you may elect to be treated as the owner and not as the beneficiary. If you elect to be treated as the owner, you determine the required minimum distribution (if any) as if you were the owner beginning with the year you elect or are deemed to be the owner. For details, see Inherited from spouse under What if You Inherit an IRA, earlier in this chapter. And, why doesn’t that mean that they would have an RMD this year, if they so elected to take as their own?  Thanks, – m

Submitted by David Mertz on Mon, 2022-11-14 22:25

  • Under CFR 1.408-8 Q&A-5, that statement only applies to making the election in a year after the year of death.  Q&A-5(a) goes on to say, “However, if the election is made in the calendar year containing the IRA owner’s death, the spouse is not required to take a required minimum distribution as the IRA owner for that calendar year. Instead, the spouse is required to take a required minimum distribution for that year, determined with respect to the deceased IRA owner under the rules of A-4(a) of § 1.401(a)(9)-5, to the extent such a distribution was not made to the IRA owner before death.”
  • For the year of death there is no RMD because the decedent was under ager 72.

Submitted by [email protected] on Tue, 2022-11-15 14:20

OK, got it.  Thanks much. -m

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