Inherited IRA – spouse

Submitted by ShipsnGiggles on Wed, 2015-04-22 19:49

husband, > 70.5 died leaving his T-IRA to his spouse
Due to a mix up (unsure who made the error) the IRA custodian esablished a spousal inherited IRA instead of making the the IRA the surviving spouses
Spouse (as a beneficiary) has been taking annual RMDs
Surviving spouse has named her daughters as her primary bene’s

Question
Can the daughter’s upon mom’s passing use there own life expectancy? Or due to mom being a bene are they forced to use mom’s remaining life expectancy. If the latter applies is there any way to change it while mom is still alive?

Thank you!



Submitted by tomd37 on Wed, 2015-04-22 20:11

Assuming the surviving spouse (the mother) has already properly designated the daughter as primary beneficiary on whatever IRAs she now holds, it is my understanding the daughter will inherit the IRAs as a non-spousal beneficiary and MUST start taking RMDs the year after the death of her mother.  The RMD would be based on the age of the daughter at the end of the year in which she starts taking the RMD.  Table I in IRS Publication 590 would be used to determine the factor to be used that first year and that factor would then be reduced by 1.0 in each succeeding year.  Tom D.



Submitted by Alan - IRA critic on Wed, 2015-04-22 20:15

Deleted



Submitted by Alan - IRA critic on Wed, 2015-04-22 20:24

  • As things stand currently, if mother passes the daughters are treated as successor beneficiaries and must continue mother’s RMD schedule. They do not get a new stretch. However, if mother rolls the IRA over OR fails to take her full RMD as a beneficiary, she then is treated as the IRA owner, and the daughters would get a new stretch upon her death.
  • If mother rolls it over, her RMDs will be lower than the Table I RMDs she is taking now. This benefit is in addition to the daughter’s being able to get their own stretch if mother becomes the owner before passing. Mother should take this step ASAP. If she becomes the owner in 2015, her 2015 RMD will be as owner, not as beneficiary.


Submitted by ShipsnGiggles on Wed, 2015-04-29 15:27

IRA making it the mothers own account.  There saying since she (mom) has been taking RMDs (as a beneficiary) she is prohibited in making the IRA here own. It sounds based your respnose the mother can still rollover the IRA making it her own account even though she has previously been taking RMDs as a bene – correct?  If so, I would think the only solution would be to trustee transfer the acount to a more accomodating custodian.  Thoughts? Thank you  



Submitted by Alan - IRA critic on Wed, 2015-04-29 19:06

Is is very rare that a custodian does not know the basic inherited IRA rules per p 5 of Pub 590 B. Perhaps given these compentency issues, the beneficiary would be better off doing the transfer to another larger custodian and then roll it over. She can also simply take a distribution and roll it over herself, but that would use up the only permitted rollover for the year and 60 day rollovers should be saved for situations where it is the only solution to a problem.



Submitted by Ben Meyer on Thu, 2015-04-23 14:12

As i see it, this issue arose due to confusion as to how to handle IRA succession.  What specifically does an IRA custodian need to do to establish a spousal inherited IRA versus of making the the IRA the surviving spouses?  Is there any specific terminology to clarify what is being requested?  What are the governing sections of IRC or TR?  How would each of these be titled?  Whose SSN is applied?  This type of info should help in giving clear instructions to an IRA custodian whenever the sad need arises. 



Submitted by Jose Morales on Thu, 2015-04-23 16:45

From a regulatory perspective it’s pretty clear what the beneficiary options are for a spouse beneficiary.  The breakdown comes from the fact that the person making the decision, the beneficiary, is usually the least educated about those options with most IRA Custodians not being much more competent themselves.  Banks and brokerages often invest very little in their IRA group, if they have one.  The governing sections of the IRC are 401(a)(9) with regards to the disposition of the assets of an IRA when the owner is deceased.  It isn’t going to get into the specific details that you are looking for though.  The beneficiary has to instruct the custodian as to whether they wish to establish an inherited IRA or take the funds into an IRA in their own name either by assumption or rollover.  The reality is that most beneficiaries will not have a firm grasp of the rules or what they should be asking for and most custodians do not have the staff trained to speak to the beneficiary rules in an in depth way that will allow the beneficiary to make the best decistion for themselves.  Most custodians in this situation will give the standard, “we do not provide advice, please seek the advice of a qualified estate planner/attorney/accountant.”  To answer the remaining questions you asked 1) the titling will be determined by whether the beneficiary chooses to open an inherited IRA or take the funds into their own name 2) Regardless of which of the prior two options are chosen the new account will always have the beneficiary’s SSN



Submitted by Ben Meyer on Wed, 2015-04-29 22:21

It would still be helpful to understand how the titling of the successor account would distinguish between an inherited IRA versus taking the funds into the the name of the surviving spouse.  Any views on this?



Submitted by Jose Morales on Wed, 2015-04-29 23:58

If the spouse assumes the funds themselves the account will be titled in the same way as any other IRA held by the spouse, such as “Jane Doe, ABC as Custodian”  If the spouse decides to open an inherited IRA the title on the account may read “Jane Doe, Beneficiary for the IRA of John Doe, ABC as Custodian”  There is no set rule by the IRS for how to title an IRA, inherited or not.



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