IRA Benef. and Separate A/C
Individual passes away prior to reaching RBD and has named their spouse, who is under age 59 1/2, as sole beneficiary of both their qualified plan and IRA. The surviving spouse wants to know if:
(1) They can roll a portion of the IRA into their own IRA and leave another portion as a beneficiary IRA (so that they can access those funds w/o penalty)?
(2) Once they turn 59 1/2, can they move the beneficiary IRA portion into their own IRA (“The Retirement Savings Time Bomb” states that they can, but doesn’t quote a code section…any idea where I could find the specifics)?
(3) They can roll the qualified plan into a beneficiary IRA but not take RMDs until the original IRA owner would have reached age RBD?
Thanks!
Permalink Submitted by Alan Spross on Thu, 2010-02-11 21:03
1) Yes, they can split out portions like this
2) Yes, a surviving spouse can do this anytime they wish. If they are older then decedent, they can avoid RMDs by leaving it in beneficiary form until the deceased spouse WOULD HAVE reached age 70.5. Will post code section or Reg later on. If survivor fails to take an RMD required as beneficiary or adds a contribution to it, the account automatically is deemed as owned (Pub 590, p 18).
3) Yes, but this may take some extra work to get an IRA custodian to set up inherited IRA. This is still allowed just by PLR 2004-50057, and not outlined in the IRS Regs yet.
Note that in this situation where decedent passed prior to RBD, if the survivor passes prior to the year decedent would have reached 70.5, the surviving spouse is treated as if they were the OWNER of the IRA for purposes of determining RMDs for their successor beneficiaries. This allows the successor beneficiaries to be treated as designated beneficiaries and use their own life expectancy for RMDs. But this ends when decedent reaches 70.5 year so the rollover should be done no later than the start of that year. (see “Death of Surviving Spouse” p 36 of Pub 590).