Inherited IRA – before RBD
Client’s spouse died at 63, before required beginning date. Client was 41 at the time, now 48. Law states that spouse can wait to take RMD until the year in which the deceased spouse would have turned 70 1/2, which is 2010.
Client is preparing to take 1st distribution and there is some question regarding what divisor should be used. Should she start with 42.7, which was the divisor for her age in the year of death, and then subtract 1 for each year since, bringing her to 35.7.
Or should she use the divisor for her age in 2010, 48, which is 36.
I know, only a slight difference, but I would like to know the correct figure.
Thanks
Permalink Submitted by Alan Spross on Thu, 2010-04-01 20:50
Client is evidently keeping the IRA in beneficiary form so that distributions will be penalty free. In this case, the divisor is based on the year distributions must begin, which is 2010.
If client will be 48 at the end of 2010, then the first divisor is 36 for the 2010 RMD. A sole beneficiary surviving does does NOT recalculate (1.0 reduction each year) and therefore will use their actual age for the divisor in future years. For 2011 it would be 35.1.
One change to note in this situation is that the successor beneficiaries were formerly treated as if the surviving spouse was the IRA owner, ie they would get their own stretch at the death of the surviving spouse. However, that benefit ends 1/1/2010 when the surviving spouse reaches an RMD distribution year. From now on, the successor beneficiaries will be treated as such and will have to use the remaining life expectancy (non recalculated) of the surviving spouse in the event the surviving spouse passes prior to assuming ownership of the IRA, which appears to be another 11 years away.