Assuming a Spousal IRA – Can it be reregistered as a Spousal Bene IRA?
Client’s husband passed, she’s age 41 and went through the Vanguard IRA Inheritance Process, they processed the registration as an Assumption of the IRA proceeds and won’t correct as the client had inadvertently selected the Assume option through their online process. We’re in the process of cleaning this up, I’ve been searching for an answer – does anyone know if we could correct the IRA to an Inherited Spousal, and what the process would be?
Permalink Submitted by Alan - IRA critic on Mon, 2023-08-14 17:02
This is unfortunately a frequent and well publicized errror made by younger surviving spouse’s. Once an assumption of ownership has been processed for a spousal inherited IRA it cannot be reversed, so there is no such process available. VG might have corrected this if they had been totally at fault, but they won’t when the client made the error. Of course, this is costly since the surviving spouse will now face a 10% penalty on distributions taken prior to age 59.5 unless they qualify for some other penalty waiver. At some point client might consider a 72t (SEPP) plan to waive the penalty, but 18 years is far too long for such a plan to remain viable without having to be modified resulting in retroactive penalties and interest. Client may want to consider this option in another 10 years or so as an 8 or 9 year plan might be workable. Meanwhile, in any year where client qualifies for another penalty waiver from the IRS chart, they might want to fully utilize that waiver and take out more than they need that year and save it.