Spouse Inherits a Beneficiary IRA and Traditional IRA. Combine RMDs?

Submitted by Jerry Brown on Tue, 2014-07-08 21:00

The wife has inherited a Beneficiary IRA and a Traditional IRA when her husband died last year. Husband’s RMDs were taken care of last year. She is 70 1/2 and is beginning her distributions this year. Must she take distributions from both IRA’s separately as her RMD divisor is different for both accounts, rather than combine the distribution and withdraw from just one account? The IRS seems a little unclear on this topic. My thoughts are she should take the RMD from the Beneficiary IRA and the Traditional IRA separately even though she inherited them from the same person. Thoughts? Thank you.



Submitted by Alan - IRA critic on Tue, 2014-07-08 22:11

  1. You are correct. Sounds like husband was the non spousal beneficiary of one of the accounts. The wife cannot roll this over to her own IRA nor can she use her own life expectancy for the RMD divisor. She must continue to use the divisor her husband would have used which was based on his age attained in the year after he inherited it. This divisor is reduced by 1.0 each successive year while he was alive and this continues after his death.
  2. The IRA account that her husband owned can be maintained separately as an inherited IRA or rolled over to her own IRA and then the RMD for this IRA and her other owned IRAs can be taken in any combination she wishes and the divisor will be the same.  Unless her husband was younger she should roll this over to her own IRA without delay and if done this year she is treated as if she owned it the entire year and her RMD would be smaller. The IRA referred to in 1) above needs to be kept separate with the RMD taken separately each year.
  3. She should check for any basis (Form 8606) she inherited with each of these IRA accounts. She would file her own 8606 and if there was basis some of her distribution will be non taxable. Any basis in the IRA that she was the successor beneficiary on cannot be combined with any basis in the other IRA she inherited. A different 8606 would have to be filed for each if they each have basis. Of course, she should name her own benficiaries ASAP on these accounts.

 



Submitted by Jerry Brown on Wed, 2014-07-09 01:30

Thank you.



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