Spouse Is Not Sole Beneficiary

Submitted by MALLARY BLADO on Mon, 2015-01-12 17:57

I am trying to gather information about my Traditional IRA. I am the owner and am currently alive(obviously) and under 70.5. If my spouse is not the sole beneficiary, i.e. he has a 50% share and 2 adult children share the other 50%, can my spouse transfer his 50% directly to his existing Traditional IRA and use the Uniform Lifetime Table when he turns 70.5 or does spouse’s 50% have to be put first into an inherited IRA (like my children) and from there transferred to his previously established IRA? I know my 2 children have to put their shares in separate inherited accounts to use their individual ages in the Single Life Expectancy table. Is there a difference if I am under 70.5 versus over 70.5 when a RMD for me would have been required? I know if my death occurs after 70.5, a RMD will have to be taken by beneficiaries, if I did not already take it, and they will have to take it as their income.

The brokerage house that has my account said if I am under 70.5, they can transfer my spouses 50% (even though he is not the sole beneficiary) into his already existing IRA without setting up an inherited IRA–unless they are actually setting up a inherited account in the background–plus they will set up 2 inherited IRAs for each child. They will do the same for my spouse if I am over 70.5 and already took out the RMD, but if I am over 70.5, they will set up a inherited IRA for my spouse and take my RMD under his SS# and send him the money. They will then transfer the balance into his previously established IRA. They said spouse can take my entire RMD from his 50% or spouse and children can divide it by percentage. Any thoughts?



Submitted by Alan - IRA critic on Mon, 2015-01-12 18:38

They are basically correct. Regardless of your age at death, your surviving spouse can roll over his share of your IRA into his own. either right away or anytime later if an inherited IRA is established first. If he needs to take withdrawals and is not yet 59.5, to avoid the penalty he should consider maintaining his interest in inherited form until he reaches 59.5. Death after your required beginning date (4/1 of the year following the year you reach 70.5) will result in an RMD requirement for the 3 beneficiaries. This RMD can be taken in any combination they wish, as it is a joint responsibility, so if one needs the funds more than the others they could satisfy the entire year of death RMD.



Submitted by MALLARY BLADO on Mon, 2015-01-12 20:19

Thank you for your response.  Publication 590 was confusing because it discusses different ways to treat the IRA as your own and then talks about the spouse having to be the sole beneficiary.



Submitted by MALLARY BLADO on Mon, 2015-01-12 20:27

We are both 66.  So just to be clear. my spouse will be able to use Table III Uniform Lifetime Table since he’ll be able to rollover his 50% into his IRA and my 2 children will use Table I Single Life Table after they re-title their shares as inherited IRAs as Jane Doe IRA, (Deceased on…….) for the benefit of Mary Smith, beneficiary.



Submitted by Alan - IRA critic on Mon, 2015-01-12 21:03

Yes, that is correct. There is no reason that he should wait to roll over his share into his own IRA, and name his own beneficiaries on the combined IRA totals. He could either have more than one owned IRA or combine the inherited portion into the IRA he already has.



Submitted by MALLARY BLADO on Mon, 2015-01-12 21:55

I appreciate your quick responses :-).



Submitted by MALLARY BLADO on Tue, 2015-01-13 15:56

I hope the following makes sense…I am not 100% understanding why my spouse (assuming I die first) will not have to set up a inherited beneficiary account so he can be the sole beneficiary in order to do a spousal rollover into his existing IRA.  The following is from Pub. 590.  Is what I put in italics the reason i.e., the brokerage is taking his 50% as a distribution and the brokerage does a trustee-to trustee rollover without setting up a inherited IRA first? “You will only be considered to have chosen to treat the IRA as your own if:

  • You are the sole beneficiary of the IRA, and
  • You have an unlimited right to withdraw amounts from it However, if you receive a distribution from your deceased 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 Tue, 2015-01-13 20:08

There are 3 ways a surviving spouse beneficiary can change inherited IRA assets to their own IRA.

  1. Take a distribution and roll it over within 60 days (not recommended with the new rollover restrictions). This would be reportable on a 1099R
  2. Do a direct transfer from the inherited IRA to their own IRA (not reportable and not a countable rollover)
  3. Assume ownership of the sole beneficiary IRA by re titling or by default (includes making a contribution to the IRA, or failing to take an RMD required of the beneficiary)

With respect to Option 3, the surviving spouse must understand when they would be deemed a sole beneficiary of the IRA. They do not necessarily have to be the sole beneficiary upon the death of the other spouse. Under the separate account rules, the surviving spouse can first create a separate inherited IRA no later than 12/31 of the year following the year of the other spouse’s death. If so, they are now the sole beneficiary of that inherited IRA account and they can use all 3 options above to attain ownership. There is no deadline for any of the 3 must be done, but there are rules as which distributions are RMDs and cannot be rolled over. Please advise if other questions.



Submitted by MALLARY BLADO on Wed, 2015-01-14 13:32

Thank you so much for all your information.



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