How to title Spousal IRA
Wife, age 55, inherits IRA from husband. We want to leave in husband’s name so that any distributions before wife is 59 1/2 would not be subject to 10% penalty.
How should the husband’s IRA be titled?
Also, the brokerage company wants a federal ID number. What number should be used?
Permalink Submitted by Alan Spross on Thu, 2011-11-03 21:51
The tax ID would be the wife’s SSN.
The title for the inherited IRA is flexible and the broker may have a preferred format. Both the decedent and the beneficiary names must be included. An example would be “Jessie Smith as beneficiary of James Smith”.
Wife does not need to take beneficiary RMDs until the year her husband would have reached 70.5. She should name her own successor beneficiary, and if she passed prior to the year RMDs must begin, her successor beneficiary will be treated as a designated beneficiary.
Permalink Submitted by Alanna Crawford on Thu, 2012-01-19 16:33
I have a similar scenario, where the surviving spouse was under age 59 1/2 when they inherited their deceased spouse’s IRA. They treated it as a beneficiary IRA so that they could access the funds w/o worrying about the 10% penalty. Now that she is 60 years old, and the penalty no longer applies, can she move the beneficiary IRA into her own IRA?
Permalink Submitted by Alan Spross on Thu, 2012-01-19 17:18
She can roll the balance over to her own IRA anytime she chooses.
The only reason remaining to retain the inherited IRA now would be if the deceased spouse was younger and she wanted to delay RMDs longer. For example, if she is 60 now, but the decedent was 5 years younger, if she rolled it over she would need to start her own RMDs in 10 years. But if she kept the IRA inherited, RMDs do not begin until the deceased spouse WOULD HAVE reached 70.5. That would mean no RMDs for 15 years.
If she was the same age or younger OR will need distributions steadily anyway, there would be no reason not to proceed with the rollover. Any basis (Form 8606) she might have inherited with the IRA that is left would become basis in her own IRA and she would have to file an 8606 to report the updated basis. That would result in part of her distributions being tax free.