Inherited IRA and 403(b)

Submitted by Robert Smith on Thu, 2016-07-14 22:00

Husband passed away in 2015 at age 82. Spouse’s trust was beneficiary of his IRA and 403(b). RMDs were made after his death in 2015 based on joint life. She is age 82 in 2016. IRA became a deceased IRA in 2015 with her trust as owner. RMDs are now being based on her single life (reducing by one, I believe) in subsequent years. Same scenario for the 403(b) – the trust was the beneficiary.403(b). It is now in her name. RMD for 403(b) is being handled the same way using the single life table (reducing by one, I believe).

Ultimately would like both accounts in a new IRA in her own name in order to 1) be able to use the uniform table and reduce the RMD and 2) name her children as beneficiaries and provide stretch ability for them.

Can the 403(b) be rolled directly to the new IRA? If this is done in 2016, should the 2016 RMDs use the Single life table or the uniform table?

Same questions for the IRAs but will the ownership of the deceased IRA need to be changed from the trust to her name before rolling over?

Thank you



Submitted by Alan - IRA critic on Fri, 2016-07-15 02:28

  • If the trust is qualified for look through treatment, and the surviving spouse is the sole beneficiary of the trust, then the trust beneficiary RMDs are based on the recalculated life expectancy of the surviving spouse (no 1.0 reduction). This applies to both the 403b and the IRA. With respect to a rollover, that depends on whether the trust provisions allow it, and even then a PLR may be required even though there have been several such PLRs over the years allowing the surviving spouse to roll the balance to her own IRA.
  • If the rollover is allowed, then the RMD for the year of the rollover is calculated using the Uniform Table for the IRA account rolled from the inherited  IRA, but for the inherited 403b the RMD for the year of the rollover is still based on inherited 403b rules (Table I).
  • An IRA custodian may or may not agree to accept the rollover without a PLR. Best to have the inherited 403b directly rolled to an inherited IRA at the same custodian as the inherited IRA so you are only dealing with one IRA custodian.

Submitted by [email protected] on Fri, 2016-07-15 20:21

Assuming the rollover is allowable,For the inherited IRA – is it allowable to diectly rollover the $ from the inherited IRA to a spousal IRA at a different custodian or do you change the ownership on the inherited IRA at the exisitng custodian to a spousal IRA and then do a direct IRA to IRA transfer?Which is this the appropriate flow?Inherited IRA (Custodian A) to new spousal IRA (new custodian) or change ownership at Inherited IRA custodian to a spousal IRA and then the trustee transfer to new spousal IRA at new custodian Inherited 403b (Custodian B) rollover to new spousal IRAThank you

Submitted by [email protected] on Fri, 2016-07-15 20:23

Assuming the rollover is allowable,For the inherited IRA – is it allowable to directly rollover the $ from the inherited IRA to a spousal IRA at a different custodian or do you change the ownership on the inherited IRA at the exisitng custodian to a spousal IRA and then do a direct IRA to IRA transfer?Which is this the appropriate flow?Inherited IRA (Custodian A) to new spousal IRA (new custodian) or change ownership at Inherited IRA custodian to a spousal IRA and then the trustee transfer to new spousal IRA at new custodian Inherited 403b (Custodian B) rollover to new spousal IRAThank you

Submitted by Alan - IRA critic on Fri, 2016-07-15 22:58

There are several ways to do this and either of the methods you listed will work. The most simple is to first have the inherited IRA correctly re titled. Then open an inherited or owned IRA at the institution you want to hold the account and have that custodian pull the funds from the first custodian into the new account.

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