Spousal “Inherited” IRA
We have a client who passed away this year at the age of 51. He left behind an IRA valued at $ 500,000.00. His wife is 45. We will need some of this money before age 591/2. We have discussed doing a Spousal ” Inherited ” IRA vs. a Spousal Rollover for said reason. My question is: What are the RMD Rules?
My understanding was that if we used the Life Expectancy Method, we would use her age of 46 in 2015 to determine the RMD by 12/31/2015? But, I keep reading that distributions must begin no later than 12/31 of the year the account holder would have reached 701/2.
Can anyone provide clarification?
Permalink Submitted by Alan - IRA critic on Fri, 2014-09-19 00:58
Yes, 70.5 is correct. If wife was the sole beneficiary and establishes an inherited IRA as she should at her current age, her beneficiary RMDs do not begin until the year the client would have reached 70.5. So no RMDs for 20 years. By that time she will be 65 and can get penalty free distributions. But she should do the rollover of the inherited IRA right after reaching 59.5 since there is no benefit in keeping it in inherited form after 59.5 when she is younger than decedent. She could also roll to her own IRA now the portion that she thinks she will not need before 59.5, but no sense taking the chance that circumstances change and she needs it all before then. It is very important that she does not forget to do the rollover when the time comes because that would subject her to RMDs sooner and also potentially destroy the stretch for her own beneficiaries.