spousal beneficiary and distributions

Submitted by Jeanne Weaver on Mon, 2014-09-15 19:02

Thank you in advance for your response to my request for information. Here are the
facts.
401k active employee dies June,2014 at age of 73
No RMD’s were taken in 2014 because of his active status

Spouse, age 55 will roll to a beneficiary IRA just in case she needs penalty-free withdrawals prior to age 59 1/2.

Here are my questions:
Must an RMD for the employee be taken for the 2014 calendar year?
Between now and when the spouse reaches 59 1/2, she is free to change her mind and roll the beneficiary IRA to her own personal IRA, correct?
Is there any advantage ( besides avoiding her RMD’s) in waiting 5 years and then taking the entire distribution as taxable income?



Submitted by Alan - IRA critic on Mon, 2014-09-15 20:17

  • Since employee passed prior to the required beginning date, there is no RMD required from the plan for 2014 and the plan should allow the entire balance to be transferred to an inherited IRA.
  • Yes, surviving spouse can roll the inherited IRA to her own IRA at anytime. She will have inherited IRA RMDs due for 2015 and beyond, but the inherited IRA RMD is erased for the year of the rollover because in that year she is deemed to have owned the IRA for the entire year. RMDs on her owned IRA of course would not begin until 70.5.
  • The only advantage in taking a full distribution would be if the balance could be converted to a Roth IRA with a tax bill lower than what would be paid on future RMDs starting at 70.5. I assume there are no current expenses high enough that would require the IRA to be fully distributed.

Submitted by Jeanne Weaver on Tue, 2014-09-16 16:11

Thanks again for the specifics.

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