Spouse beneficiary options
I am retired, 58 and my retired spouse is 62. I have a $350,000 IRA from which I am receiving 72t payments. My 5 years for mandatory withdrawals end in 2012. My spouse and children are listed as beneficiaries. If I died tomorrow, I would expect my spouse and children to contact the broker to have the money rolled over into separate inherited IRAs for each of them. If my spouse elected not to take the life expectancy RMD, would the 5 year option be available even though neither of us are 701/2? I’m not clear about whether age is attached to that option. Also, is there a limit to the amount he could withdraw in one year if he is willing to pay the taxes?
Thanks!
Permalink Submitted by mk foss on Tue, 2009-01-06 22:14
The 5-year option is available when the account owner hasn’t reached age 70.5 but I don’t see why someone would choose it. Under the 5-year rule, the account must be emptied by 12/31 of the year that contains the 5 year anniversary of the death. No particular amount is required to be withdrawn each year and often the entire amount is taken out in the last year.
There is no prohibition in liquidating the entire account at any one time, the RMDs are significant because if they are not distributed there are 50% penalties.
If you were to pass away before age 70.5, your spouse could roll over the benefits and take RMDs after he’s 70.5. He could take any amount from the rollover account before 70.5 that he wishes to.
If he were to set up a beneficiary account, he could wait until you would have reached 70.5 for required distributions but could take anything out that he wished before that time.
Of course if you were to pass away before the 72t period ends, that election would be disregarded. Beneficiaries would have the same choices as if the 72t stream of payments never occured.
Permalink Submitted by nzinga barnes on Wed, 2009-01-07 13:00
Thank you for a speedy reply. Your advice is extremely helpful.