Husband w/IRA dies & Wife (over 70 1/2) inherits his IRA
Hello,
A husband and wife each has a traditional IRA. The wife is 75 years old and her husband just passed away – he would have been 70 1/2 in April 2008.
The wife already took her IRA RMD for 2007. She is also the 100% primary beneficiary of his IRA.
Can I move his IRA into hers and not have to worry about an additional RMD for 2007 (i.e. her account would have a higher value, but the RMD was based on her 12/31/07 balance, right?)?
My thought is if we move it in 2007, then the IRA custodian will automatically calculate her IRA RMD for 2008 based on the full value of both accounts (together).
Is there anything else that I should be considering?
Thank you,
Jim
Permalink Submitted by Alan Spross on Sat, 2007-09-29 04:46
Jim,
The wife will not have an increased RMD for 2007, because she has already taken the correct amount based on her 12/31/06 (not 07) balance. So you are correct that there is no reason not to roll over husband’s IRA into hers this year, probably ASAP.
What is interesting here is that there is no real RMD consequence if the rollover does not get done in time. The reason for that is even though her RMD as a beneficiary of her husband’s IRA would be much greater, if she just used her own divisor she would be deemed under default rules to have made the IRA her own because she failed to take the amount required as a beneficiary. Therefore she would actually have taken the required amount under the default rules.
But rather than falling back on the default rule to keep the RMD down, it is better to roll it now as you intend. Of course, any IRAs that remain should have the beneficiary updated ASAP.
Permalink Submitted by Jim Shope on Sat, 2007-09-29 17:33
Alan,
Thank you for your detailed response. It is always nice to bounce ideas off someone to help reassure that you are doing things sensibly.
This is the interesting part, however. “The reason for that is even though her RMD as a beneficiary of her husband’s IRA would be much greater, if she just used her own divisor she would be deemed under default rules to have made the IRA her own because she failed to take the amount required as a beneficiary.”
I think you are stating the above based on BDA IRA rules and it makes sense. I thought I remembered reading somewhere that a spouse had the option to continue the IRA with the deceased’s life expectancy or their own. If that is not the case, then it takes the guess work out of it.
There are a lot of intricacies in this area and it is great that Ed has put this web-site together.
Thank you for all of your support on this forum Alan.
Jim