RMD beneficiary
My 73 year old husband died in January 2011. I am his 73 year old spousal beneficiary.
Is there an IRS deadline (year/month) for rolling over the IRA to the spouse’s name?
Bank says spouse must take 2011 RMD from the IRA before or at time of rollover to her name instead of waiting until December. Is this so?. I don’t want to lose the year’s interest which is at a much higher rate than current rates.
Permalink Submitted by mk foss on Thu, 2011-02-10 18:22
There is no deadline for a spouse to do a rollover. A recent post asked the same question. The original owner’s 2011 RMD must be taken by the earlier of the date of the rollover or 12/31/2011. The surviving spouse beneficiary can wait a number of years to do the rollover but usually they do not.
If you don’t roll over the benefits, the RMDs (beginning next year) are higher. The factor for a 74 year old beneficiary taking a distribution in 2012 is 14.1 (about 7% of the 12/31/2011 balance). If the IRA were rolled over before 12/31/2011, the factor for 2012 for a 74 year old is 23.8 (4.2%).
Permalink Submitted by Alan Spross on Thu, 2011-02-10 19:32
Sorry to hear of your loss.
With respect to the bank’s requirement, the current IRS Regs are vague about the RMD being a pre-requisite of your assumption of ownership. However, the 2001 proposed RMD Regs included this as a specific requirement before you could have the IRA retitled in your name, but the final 2002 Regs dropped this wording, and instead stated that the decedent is treated as if they lived all year for RMD purposes. Accordingly, the bank should not require you to take your husband’s 2011 RMD before they re title the IRA in your name.
If you distributed the funds to do a spousal rollover to your IRA, then the RMD amount cannot be rolled over. But simply re titling the IRA as yours does not constitute a distribution.
You may never convince the bank since the IRS Regs are not crystal clear, but you still have the option to continue as beneficiary for the remainder of 2011 and then assume ownership in December. However, there is a risk here of loss of your own successor beneficiary’s stretch if you were to pass while a beneficiary rather than owner. For example, if you named a child as your successor beneficiary (and you should name your successor ASAP) and then passed, the child would not be treated as a designated beneficiary and be able to use their own life expectancy for RMDs, but would have to continue using your remaining life expectancy. That would force a child or younger beneficiary to take much larger RMDs. That is the only downside of waiting until late in 2011 to assume ownership or to roll the IRS over.
Other than your interest rate issue, it is to your benefit to assume ownership sooner rather than later.