disadvantages of rolling $ to spousal IRA?
Making inappropriate spousal rollovers – Most IRAs list the owner’s spouse as the primary beneficiary, and one of the most popular strategies for a spousal beneficiary is to simply roll that IRA into the surviving spouse’s own IRA. But it can be more tax efficient for a surviving spouse to leave the IRA in the owner’s name or disclaim the assets thereby allowing them to pass to the contingent beneficiary.
Can someone point out a few examples of when leaving the IRA in the deceased owner’s name is advantageous tax wise?
Permalink Submitted by Al Fry on Thu, 2008-11-13 22:18
I don’t think the owner’s IRA should ever simply be left in the deceased owner’s name. It should be in the beneficiary’s name, either as their own (only available to spouse beneficiaries) or as an inherited IRA. An inherited IRA is suggested by the IRS to be titled as “Jane Doe as bene of John Doe”. Some prefer to add “Deceased IRA” on the end, as well. One advantage a spouse would have in putting it in an inherited IRA would be where they are under age 59 1/2, to avoid the 10% penalty. Another would be where the deceased spouse was younger than the surviving spouse, and under 70 1/2 (RMDs can be delayed).
Permalink Submitted by charles lore on Fri, 2008-11-14 00:56
Dont forget that a spouse who is a beneficiary of an inherited ira of her deceased husband can always, anytime, take the funds and roll to her own ira. This would set up a longer stretch to the kids. If she died while a beneficiary the kid would take over and use the years left on the mothers life expectancy..If she rolled over the kid uses the kids own longer LE.
Permalink Submitted by Alan Spross on Fri, 2008-11-14 05:42
If the deceased spouse passed prior to the year they turned 70.5, the survivor can avoid RMDs until the year the decedent would have reached that age. In the meantime, if that surviving spouse also passes prior to having to take RMDs, they are treated as the owner and this allows the successor beneficiaries to get a stretch based on their own life expectancy*. But this benefit ends as soon as the survivor reaches an RMD year.
* Does not apply to surviving spouses of a surviving spouse
(Don’t think about this one too long)