IRA W/D after Death of Spouse

Submitted by Krista McBeath on Mon, 2015-06-01 20:30

Decedent and surviving spouse were/are under 59 1/2. The client needs some extra income but do not want to place the amount required into a 72t vehicle. If we utilize an Inherited IRA would the beneficiary be limited to the MRD? Could she withdraw more than the minimum without penalty? Last option that I can think of is an Inherited IRA that is liquidated by the end of the 5th year following date of death. This would involve a partial rollover of an IRA to an inherited IRA with the remaining assets being rolled over into her IRA. Is a partial rollover to an inherited IRA allowed?



Submitted by Alan - IRA critic on Mon, 2015-06-01 20:50

  • Yes, any portion of the inherited IRA can be rolled over to the surviving spouse’s own IRA at any time. For the inherited IRA, RMDs do not begin until the year the decedent would have reached 70.5, but the surviving spouse can take any amount needed from the inherited IRA without penalty. The surviving spouse would normally roll over the inherited IRA at 59.5, but if older than the decedent and did not need the money could wait until the end of the year the decedent would have reached 70.5 since this would avoid RMDs for a few extra years.
  • While the surviving spouse could opt for the 5 year rule, in this case it is not beneficial because there are no RMDs anyway for a period much longer than 5 years.

Submitted by Krista McBeath on Mon, 2015-06-01 21:26

I would just like to clarify.  If the decendents IRA is $400,000, we could take $100,000 and roll over into an Inherited IRA for the spouse and she could take any amount from the inherited IRA penalty free?  Woudl withdraws have to be completed by the 5th year. 

Submitted by Jose Morales on Mon, 2015-06-01 21:51

The amount placed into the inherited IRA will have no required minimum distribution until the year in which the deceased would have attained the age of 70 1/2, which would be must longer than the 5th year if the age of the deceased is as you stated.  The spouse beneficiary can take out as much or as little as they want from the inherited IRA.

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