Using special rule for surviving spouse

Submitted by ufleming on Wed, 2023-11-08 20:41

I have some questions on the special rule (IRC Section 401(a)(9)(B)(iv)(I)) for surviving spouses for a traditional IRA. If a spousal beneficiary ( at an age already subject to RMDs) elects to use this rule to delay RMDs (based on the decedents age which is not subject to RMDs):

Do some custodians not accept these funds or honor this election? (Some seem lost and that worries me)

How should the account be titled? (Inherited IRA or in the name of the surv. spouse)

Is it up to the client or custodian to calculate the RMD based on the decedents age?

I appreciate any insight and help on this topic!



Submitted by Alan - IRA critic on Wed, 2023-11-08 22:16

  • If a custodian is confused about this rule that existed long before the Secure Act, I don’t know how they are going to deal with the Secure Act Regs. I would also expect that very few custodians are not familiar with this long standing tax code provision. A sole spousal beneficiary can maintain the inherited IRA as a beneficiary as long as they wish, and no custodian can force them to do the spousal rollover. There are no beneficiary RMDs required until the year the deceased spouse would have reached their RMD age, but upon reaching that age the surviving spouse should then elect to assume ownership of the inherited IRA, and at that point the custodian should provide the RMD amount to the spouse as the owner. The surviving spouse as the owner would uses the Uniform Table which results in a lower RMD than continuing as a beneficiary and using the single life table. An IRA custodian cannot “force out” a distribution, therefore they really have no choice but to adhere to the decision made by the surviving spouse. Note that if the surviving spouse were to pass before RMDs from this account were required, they would automatically be treated as the owner of the inherited IRA and that results in their own beneficiary being treated as a designated beneficiary instead of a successor beneficiary.
  • Prior to the surviving spouse electing to assume ownership, the custodian is not required to calculate a beneficiary RMD, and in this case there would be no beneficiary RMD required until the year the deceased spouse would have reached RMD age (72, 73, 75) based on their DOB.
  • However, the Secure Act does affect the assumption of ownership process, which is a better way to acquire ownership than taking a distribution and doing a 60 day rollover.  There is a new deadline for assumption and in this case it would be the year that the spousal beneficiary would have to take their first beneficiary RMD if they did not elect to assume ownership. For example, if 2026 is the year that the decedent would have reached RMD age, the surviving spouse must inform the custodian that they are assuming ownership before the end of 2026. After that, they could still roll over a distribution to their own IRA less the beneficiary RMD for that year, but this is an inferior result to assuming ownership during at the proper time.

Submitted by ufleming on Thu, 2023-11-09 13:47

Alan, thanks for your detailed reply on this, it certainly offers a lot of clarity- you are a national treasure sir!

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