Spouse Beneficiary Options
Husband died, pre 70.5, spouse is sole beneficiary. Her choices are roll into Her IRA, or transfer to Beneficiary/Inherited IRA. Let’s say she rolls part of IRA assets into Inherited IRA. What exactly are her options inside the “Inherited IRA”? I feel there is some confusion out there — does she [u]have[/u] to take RMDs the year after year of death, or can she wait until the husband’s age 70.5? Let’s say she can wait, but then in year 5 after death, she needs money from the IRA, but isn’t 59.5 — can she then take money out of the Inherited IRA penalty free? Thanks for any input
Permalink Submitted by Al Fry on Tue, 2008-11-25 02:08
Shoud be no confusion here. As a surviving spouse, she does not have to take RMDs until he would have been 70.5. And yes she can take any money out without penalty, just taxes. If she is younger than he was, she should probably roll it to herself, either when she turns 59.5, or earlier IF she will not need any more distributions until after 59.5. Her benes will have better stretch options under her IRA (assuming her benes are younger than she is).
Permalink Submitted by Alan Spross on Tue, 2008-11-25 03:06
In certain cases, the surviving spouse can combine these two options by re registering the inherited IRA in beneficiary form, then taking a chunk of it out and rolling it over to her own IRA. In any event, there is no need to transfer to a new inherited IRA any amount that should remain in inherited form, because the original IRA automatically becomes an inherited IRA when it is re registered as such. The surviving spouse then names her own successor beneficiary on that account.
The combination might apply if the survivor wants to keep enough in inherited form to supply funds without penalty if needed, but not so much that RMDs would be higher than desired starting in the year the deceased spouse would have reached 70.5.
Again, many of these options only apply to SOLE spouse beneficiaries.