Spousal Partial Primary beneficary

Submitted by Anthony G. Engrassia on Wed, 2013-11-20 16:08

Here is the situation:

My client is a partial primary beneficiary of her husband’s IRA with her two step-sons at Pershing. Pershing is stating that we have to open an Inherited IRA and then transfer it to a spousal rollover IRA. I’ve never heard of such a thing and it causes me to have concern. I’d like to know what Ed says about how to execute this transaction. We are in the process already, so a quick decision would be appreciated.

Pershing:
In this case if the wife wants to ultimately move the asset to her non Inherited IRA, she will still need to open the
Inherited IRA first, move the assets she is entitled to, into that account, and then from there, journal the assets into her Participant IRA.

The inherited IRA must receive the assets first ( Asset Movement Auth form), as a pass through account and then from there, she will
be able to move the assets into her IRA account. To process the journal from her Inherited IRA to her Participant IRA, we just need a signed
LOA advising that she was the spouse of Mr. Blank, account # 3c0-456789, and that she wants to assume the assets as her own
and move them to account # 3c0-123456

I know it seems like an unnecessary inconvenience, but that is how we must have the assets move correctly for proper reporting.

IRS Publication 590, page 18:
Treating it as your own.
You will be considered to have chosen to treat the IRA as your own if: Contributions (including rollover contributions) are made to the inherited IRA, orYou do not take the required minimum distribution for
a year as a beneficiary of the IRA.You will only be considered to have chosen to treat the IRA as your own if: You are the sole beneficiary of the IRA, andYou have an unlimited right to withdraw amounts from it.
However, if you receive a distribution from your de-
ceased spouse’s IRA, you can roll that distribution over
into your own IRA within the 60-day time limit, as long as
the distribution is not a required distribution, even if you
are not the sole beneficiary of your deceased spouse’s IRA



Submitted by Alan - IRA critic on Wed, 2013-11-20 20:47

  • Pershing applies the same processing procedures as most large IRA custodians. The need to first re title the deceden’ts IRA or in the case of multiple beneficiaries to establish separate inherited IRAs is addressed in this recent article by Natalie Choate:  http://www.morningstar.com/advisor/t/83651808/titling-the-inherited-ira.htm#axzz2lDhdUQF6
  • Of course, it is not always beneficial for a surviving spouse to do the rollover right away, particularly if they are not yet 59.5. And since a sole surviving spouse beneficiary can delay beneficiary RMDs until the decedent would have reached 70.5, when the survivor is older, that means that RMDs could be deferred until after age 70.5 if the survivor wants to maximize the stretch. Note that even though this spouse was NOT a sole spouse beneficiary at the time of death, creating the separate inherited IRA before the end of the year following the year of death effectively makes her a sole spousal beneficiary upon establishing the separate inherited IRA.
  • Some custodians do not want to act in this situation until all 3 beneficiaries supply the required info, and they want to set up the separate inherited accounts at the same time. Some beneficiaries fail to act and that can tie up the others. Fortuneately, Pershing is not one of those that requires all beneficiaries to submit their data before setting up accounts for those that do.


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