RMD factor for spousal beneficiary
Assume IRA owner is age 80.
Assume spouse is sole beneficiary and is also age 80.
Owner dies at age 80, and the spouse chooses to become the owner of the IRA.
Is it correct that both before and after the original owner’s death, the Uniform Table is used to calculate RMDs?
Because they are both the same age, does that current and future factor remain the same as if the original owner hadn’t died? Or, does the new spousal owner (while the same age as the original owner) use a different factor that accelerates the RMDs at a pace which is faster than what the original owner would have used?
Thank you
Permalink Submitted by Alan Spross on Thu, 2012-03-22 23:11
No, different tables apply between inherited and owner status. The surviving spouse in this case should assume ownership of the inherited IRA for two reasons:
1) RMDs would be lower because an inherited IRA must use Table I, the Single Life Table. An owned IRA uses the Uniform Table which assumes a joint life expectancy with a spouse 10 years younger. Therefore, the uniform table will produce lower RMDs in most cases. But see Note 2 below.
2) If the inherited status is maintained after the beneficiary must take RMDs, their successor beneficiary will not get a new stretch and will have to continue the RMD schedule of the beneficiary spouse. Conversely, on an owned IRA the beneficiary will get a new stretch using their own life expectancy.
Note: If a sole surviving spouse fails to take the full RMD required as beneficiary, the IRA defaults to ownership status, and once that happens it cannot return to inherited status. This rule helps some people and reduces the excess accumulation penalty.
Note 2: If the surviving spouse is considerably older than the decedent, the RMD could be less if the IRA remained inherited because the decedent’s age can continue to be used if they passed after the RBD. For example, if the decedent was 80 and surviving spouse was 92, use of the decedent’s age would produce a lower RMD, at least to start with.
Permalink Submitted by Thomas Ferry on Fri, 2012-03-23 12:25
Thank you
Please comment on if the factors to be used for future RMDs for the spouse beneficairy who assumes ownership (and is the same age as the origianl owner) will be the same as if the original owner had not died.
I understand the use of Uniform table will continue with the spousal beneficiary as the new owner. Is there only one set of factors on the uniform table, so that, b/c original owner and spouse are the same age, the RMDs wil be the same as if the original owner had not died?
Permalink Submitted by Alan Spross on Fri, 2012-03-23 16:15
The surviving spouse’s RMDs as owner of the IRA will be the same as her husband’s would have been if they would have been the same age at the end of the year (if spouses are same age at some point in the year does not make them necessarily the same age on 12/31).
The uniform table applies for all IRA owners, and it only has one set of divisors, a different one for each age. It includes automatic “recalculation” of life expectancy, which means that each successive year’s divisor does not reduce a full 1.0, it reduces less because of the assumption that living the additional year eliminated the odds of dying in that year, and the table provides a new life expectancy each year based on that. It also includes the joint life expectancy with a spouse 10 years younger even for single people which is the main reason for the smaller RMDs for IRAs that are owned.