How do I make sure my children can utilize the stretch IRA dated 6-27-16
The above subject question was asked on-line on 6-27-16
The answer given on-line was “the most common scenario is husband names wife as IRA beneficiary, husband dies, wife moves the funds TO HER OWN IRA and names the children as beneficiaries”
I am confused . I saw an example somewhere that read that the funds were to stay in the husbands account and the account was changed to read “John Smith, Deceased, IRA for the benefit of Mary Smith” and the children named as beneficiaries.
My question is : Am I nitpicking, or are both statements acceptable or which set of instructions will satisfy the IRS requirements
Permalink Submitted by Alan - IRA critic on Tue, 2016-07-12 15:07
The surviving spouse can either maintain an inherited IRA or roll it over with the surviving spouse as owner. The RMDs for the surviving spouse are usually lower as the owner. More importantly, if the children inherit an already inherited IRA, they do not get their own stretch in most cases. There are some exceptions. However, if the children inherit an IRA directly from the owner and not from a beneficiary, they get their own stretch. Again, there are two options for the surviving spouse and both meet IRS requirements. But as soon as it is to the advantage of the surviving spouse to become the owner, they should do so. In order to become the owner they must first provide documents including the death certificate to the custodian who then establishes an inherited IRA. From there they can roll it over to their own name either immediately or at any future time.
Permalink Submitted by Wendy Mommaerts on Mon, 2016-07-18 18:13
Hi Alan,re: Surviving spouse treating the deceased’s IRA as their own IRA…I see that it was suggested that a surviving spouse should establish an inherited IRA and then roll it over into the spouse’s own IRA. Can’t you just move the deceased’s IRA directly into the spouse’s IRA, bypassing the inherited IRA?
Permalink Submitted by Jose Morales on Tue, 2016-07-19 16:39
Hello Wendy. Yes, the surviving spouse can have the funds moved into their own IRA without having to pass through an inherited IRA. Whether this is the best option would depend on a few factors, most importantly whether the surviving spouse has reached the age of 59 1/2 and what need they may have to withdraw funds from the IRA without a tax penalty.