IRA os deceased rolled over to spouse w/o taking due RMD
What happens if a now deceased spouse (died Dec 29, 2014) turned 70 in March 2014. Turned 70.5 in September 2014 and chose to defer his first distribution which can be made no later than April 1st of 2015. (The second distribution is due to be made no later than December 31, 2015.) Neither were taken. In March 2015, the surviving spouse rolls over the deceased spouse’s IRA into her own name. She reached 70.5 in 2014 as well, so she turned in the form on March 30th to take her first IRA distribution from her newly established IRA. The distribution has come out, but after April 1st. She understood from the custodian that it is the date she turns in the form, not the date the funds were distributed.
I am concerned about her rolling the account over in her name without taking any RMD from his account prior to. I am also concerned about the date of the distribution from her account being post April 1st.
Permalink Submitted by Alan - IRA critic on Sun, 2015-04-26 03:25
Since the IRA owner passed prior to his RBD, there is no 2014 RMD as the death effectively erased it. That makes the 4/1/2015 date irrelevant. The “spousal rollover” was probably done as a same trustee transfer with no distribution made, just a transfer of the funds to her own IRA account. This would be a non reportable transfer. Shortly thereafter a distribution was made from the owned IRA account. This distribution would be applied to the 2015 RMD based on the inherited IRA value on 12/31/2014. If it was calculated differently as a 2014 RMD, then a supplemental distribution before year end would be needed to complete the 2015 RMD requirement. Please advise if I assumed something here that was done differently.
Permalink Submitted by Catherine Turner on Mon, 2015-04-27 13:56
Thank you for your reply. I will learn later today whether HER RMD was tagged for 2014 or 2015. You have put both me and the client at ease with the news that his death erased all obligation/requirement to take out a distribution for both 2014 and PRIOR to her rolling the funds (T-to-T) to a new IRA in her name…..and that was because he died BEFORE 12/31/2014 even though it was AFTER the date he reached 70.5.
Permalink Submitted by Alan - IRA critic on Mon, 2015-04-27 17:33
The 2014 RMD was erased because he passed prior to 4/1/2015, not 12/31/2014. 4/1/2015 is the required beginning date. The distribution taken will be applied to the 2015 RMD because there was no 2014 RMD. A distribution is not assigned to any particular year for RMD purposes by the custodian, but if there was a 2014 RMD any distribution taken prior to 4/1/2015 would automatically be applied to the 2014 RMD under IRS Regs.