Death of IRA Owner and Beneficiary questions
Hi,
I am helping someone who unfortunately had their spouse pass away unexpectedly in the last week. The deceased had an IRA with two beneficiaries, 50% to her spouse and 50% to her daughter and I have a few questions regarding their situation going forward.
The deceased was 70 years old when she passed away and would have turned 71 on 11/22/08 and thus, her RBD was 4/1/2009. Her RMD to be taken by 4/1/2009 was $21,232 and she had already taken $16,000 in 2008.
Here are my questions:
1) Does it make the most sense to split the IRA now because one beneficiary is 72 and the other is 48?
2) When using the single life expectancy table for inherited IRA’s, do you use the age of the beneficiary on Dec. 31 of the year after the IRA owner died (Dec. 31, 2009) to get the RMD for 2009 ?
3) Since there is $5,232 (21,232-16,000) to be taken before 4/1/2009, how does this work with respect to the beneficiaries?
4) When do the beneficiaries need to begin RMD’s, given the facts above?
5) If the IRA is split ASAP, will the beneficiary RMD’s for 2009 be based on the ending balance of the IRA on Dec. 31,2008?
Thank you very much for the help. It is appreciated.
Permalink Submitted by Alan Spross on Tue, 2008-06-24 02:22
1) Separate accounts do not have to be established until 12/31/09, but they can be established anytime prior to then.
2) Correct. But the spouse would probably roll her share to her own IRA to get the uniform lifetime table.
3) That amount is immaterial to the beneficiaries since owner passed prior to the RBD.
4) No later than 12/31/09.
5) Yes, of each share.
Permalink Submitted by [email protected] on Tue, 2008-06-24 02:35
Alan,
Thank you very much for the help. One final question. Can the spouse roll his portion directly into his IRA before the account is split? Or does the account need to be split first and then have his split IRA rolled into his existing IRA as a two-step process?
I appreciate the help!
Permalink Submitted by Alan Spross on Tue, 2008-06-24 03:59
Yes, the spousal rollover could be done, and that would in effect leave the daughter as the only beneficiary so she could re title the existing account and that would constitute a separate account for her. In effect that would prevent opening any new accounts if the surviving spouse already had an IRA of his own.
Each of the two should be sure to name succesor beneficiaries ASAP. Finally, for any inherited IRA, the beneficiaries should check to see if there is any unrecovered basis from non deductible contributions made by the decedent. Each would get their share and this would result in distributions being less than 100% taxable. They would have to file an 8606 to transfer any basis to their respective accounts.
I think you posted this at Fairmark, where I also post, but will not reply to that one to allow another opinion…….to see if any other comments agree with this one. Then I may chime in.
Permalink Submitted by [email protected] on Tue, 2008-06-24 13:12
Thanks a bunch Alan!
Yes, I did post at Fairmark as well.