Spousal Beneficiary Publication 590 confusion – HELP

Submitted by Patrick Rudy on Wed, 2013-02-06 15:22

In the 2012 publication 590 on page 37, left hand side near the top, there is a section with the heading “Spouse as sole designated beneficiary” which includes the following short paragraph:

“Use the life expectancy listed in the table next to the spouse’s age (as of the spouse’s birthday in 2013). If the owner died before the year in which he or she reached age 7012, distributions to the spouse do not need to begin until the year in which the owner would have reached age 7012.”

On page 38, towards the bottom left-hand side, under the heading “Surviving Spouse” the following short paragraph appears:

“If you are the owner’s surviving spouse and sole designated beneficiary, the owner had not reached age 7012 when he or she died, and you do not elect to be treated as the owner of the IRA, you do not have to take distributions (and use Table I) until the year in which the owner would have reached age 7012.”

Further, when I have spoken to a few people about this, they say that the surviving spouse should transfer her deceased spouse’s IRA into her own IRA and then she wouldn’t have to take the RMD’s until she reaches age 70.

What is the explanation for this apparent discrepency in Pub. 590 and what is the right answer on options for a sole-beneficiary, surviving spouse of an IRA holder.

Thank you,
Patrick



Submitted by Alan - IRA critic on Wed, 2013-02-06 19:31

There isn’t any inconsistencies in the two quotes. They both indicate that a sole surviving spouse does not have to take RMDs as a beneficiary until the year the deceased spouse would have reached 70.5. When the inherited IRA should be rolled over depends on both spouse’s ages and whether funds are needed before RMDs begin. Once an inherited spousal IRA is rolled over RMDs change from beneficiary RMDs to owner RMDs. The following guidelines generally should be observed:

  1. If surviving spouse is not yet 59.5 and may need funds, IRA should remain as inherited status to avoid 10% penalties.
  2. After 59.5, if surviving spouse does NOT need distributions and decedent was younger, the IRA should also remain as inherited to delay RMDs as long as possible.
  3. Once RMDs must begin as a beneficiary, the rollover to survivors own IRA should be done as owner RMDs are much lower than beneficiary RMDs except in those cases where the beneficiary is MUCH older than the decedend and the decedent passed AFTER the required beginning date. In that situation beneficiary could use decedent’s remaining life expectancy. This is rare and survivor must be much older than decedent, and is done at the expense of survivor’s own successor beneficiary RMDs.
  4. Therefore, the best  time to do the rollover depends on the individual circumstances, mostly ages. In most cases, the rollover should be done when ownership will result in a lower RMD than beneficiary status.


Submitted by Patrick Rudy on Wed, 2013-02-06 20:14

Thank you for the clarification and I understand what you lay out. 



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