decedent IRA for spouse
Sole proprietor with a profit sharing plan dies at age 57. His widow, age 52 is the sole beneficiary.
If she she rolls the profit sharing plan to a decedent IRA, will she have to take RMDs at the same time that her deceased husband would have turned 70 1/2?
and
Can at some later date after her age 59 1/2, can she roll the decedent IRA to an IRA in her name, thereby delaying the RMD to her age 70 1/2?
Thanks
Permalink Submitted by Alan Spross on Thu, 2011-12-08 23:07
Yes and Yes.
Therefore if she does the rollover in 8 years to her own IRA, it will be 18 or 19 years from now before she must take any RMDs.
Permalink Submitted by Thomas Ferry on Fri, 2011-12-09 23:16
Thanks
Should we be concerned that the legislature that permits her to make the decedent IRA hers could be revoked before she gets a chance to do so? How likely is that to happen?
Permalink Submitted by Alan Spross on Fri, 2011-12-09 23:45
Extremely unlikely. The right of a surviving spouse to assume ownership has never been questioned, nor has any proposal to change it ever been presented.
The challenge if any, is opening an inherited IRA in the first place to accept the employer plan funds. This was not allowed until IRS PLR 2004 50057, and there are still some IRA custodians that may balk at setting up the inherited IRA, and want to register the surviving spouse as the owner. Sometimes it takes some effort to find an IRA custodian to open the inherited account.
There is also a default rule that if a spousal beneficiary fails to take an RMD as beneficiary, the inherited IRA will be treated as owned. Of course, in this case there is no beneficiary RMD required for many years that would trigger ownership if it was missed.