IRA Withdrawal for Medical Reason
I know you can withdrawal from an IRA for Medical reasons.
However, what happens when that individual dies before the withdrawal is made can it
1. Be done before rolling it over the the spouse ( What are the tax status of the withdrawal)
2. Or it can’t be done.
Permalink Submitted by Alan Spross on Mon, 2011-06-13 22:37
The surviving spouse can take a distribution from the inherited IRA before it is rolled over. All distributions from inherited IRAs are penalty free. If the distribution is made by the owner, the medical exception to the penalty only applies to expenses greater than 7.5% of AGI whether medical expenses are itemized or not.
The ordinary income on an IRA distribution goes to the recipient. However, a surviving spouse would probably be filing jointly with the deceased spouse for the year of death and therefore the income would be on that joint return as would be any itemized deductions for medical expenses paid. If the spouse passed at the end of the year and their final medical expenses were billed and paid in the following year, the surviving spouse has the option to include medical expenses paid within 12 months of the date of death as being paid when incurred, ie in the prior tax year. That provides flexibility to match the itemized deductions to the year the IRA distribution is taken in the case of the death of the IRA owner.
If the surviving spouse rolled the IRA over before paying the medical expenses and is under 59.5, then the penalty will apply to distributions that cannot be applied to qualifying medical expenses paid in that year.