surviving spouse IRA question

Submitted by Clarence Boje on Sat, 2016-09-03 17:29

A deceased spouse has left his TIRA’s and RIRA’s to his surviving spouse who is the sole beneficiary. What is the procedure and timetable for the surviving spouse to “Make all IRA’s her own” so the surviving spouse can eventually leave any remaining funds to the children as inherited IRA’s. Please explain in detail
What do the children have to do to insure that they will benefit from the funds over their lifetime. Thank you.



Submitted by Alan - IRA critic on Sat, 2016-09-03 19:08

  • There is no deadline to roll over the inherited IRA to an IRA owned by the surviving spouse. While in many cases this should be done ASAP, in other situations it becomes a timing issue where there are benefits to leaving the IRA in inherited status for a time before eventually rolling it over. The need for funds, the ages of the decedent and survivor, and stretching opportunity for the next beneficiary are factors in making this decision.
  • If surviving spouse benefits for leaving the IRA inherited for a time, they still name their own successor beneficiary ASAP. If the surviving spouse passes before inherited IRA RMDs are required, the successor beneficiaries still get their life expectancy stretch. But if the spouse passes after inherited IRA RMDs begin, the successor beneficiaries do NOT get a new stretch. They must continue the RMD schedule of the surviving spouse.
  • Once the surviving spouse passes. the children either get a new stretch or they don’t. If they inherit an IRA owned by the surviving spouse, they get the new stretch. If more than one child, separate inherited IRA accounts must be established by the end of the year following the year of death in order for each to use their own life expectancy. Other than that, taking advantage of the stretch is a matter of discipline, not taking more than the RMD amount each year.
  • If you provide the ages of each spouse at the end of the year of death of first spouse, and how soon the survivor will need funds from the IRA, more specifics regarding the options can be provided.

Submitted by Clarence Boje on Sat, 2016-09-03 21:35

   The deceased spouse passed in 2016 at age 82.He had been making yearly RMD’s since he was 70..He has not withdrawn any funds from his RIRA’s which were all conversion RIRA’s and are all older than 5 years.   The surviving spouse is 79 and has been making RMD’s since she was 70.She has not withdrawn any funds from her conversion  RIRA’s and all RIRA’s are older than 5 years except one. She will need to supplement her income from the RMD’s in 2 years.   When she decides to roll over the inherited IRAs to an IRA owned by the surviving spouse, how does she do that? If she does not roll over the inherited IRA to herself, how does she handle the  taxes to be paid on the RMD from the TIRA prior to any rollover.   Larry, THANK YOU SO MUCH FOR ALL YOUR ADVICE. Is this sufficient information to provide more options for me? Please let me know if there is anything else you may need. Thank you again.  

Submitted by Alan - IRA critic on Sat, 2016-09-03 23:34

The action plan is simple at these ages. She should submit a copy of the death certificate and other requested data to establish  inherited IRAs. Then at the same time she should request that the 2016 RMD of the deceased spouse for the TIRA be distributed if he did not complete the 2016 RMD before passing. Also effective with the same request she should request direct transfers of the inherited TIRA to her existing TIRA and the inherited Roth IRA to her existing Roth IRA. She will therefore have two remaining accounts, one TIRA and one Roth IRA just as she had before his death. But they will be much larger. In other words, at these ages the spousal rollover should be done right away instead of later. She will have to change her IRA beneficiaries if husband had been the beneficiary before. Note that her Roth IRA is long since fully qualified and tax free, but no RMDs are required from the Roth. If either of them have basis in TIRAs from non deductible contributions, please advise.

Submitted by Clarence Boje on Sun, 2016-09-04 00:50

Yes, the deceased spouse and the wife each have 3 figure amount in TIRAsfrom non-deductable contributions

Submitted by Alan - IRA critic on Sun, 2016-09-04 03:03

If so, their joint returns should have had a Form 8606 completed for each of them for every year’s distributions. The surviving spouse would take the remaining line 14 basis on deceased spouse’s last 8606 and add it to their own basis on line 2 of the 8606. While 3 figures may only result in a very small amount being non taxable each year, it does reduce taxes somewhat.

Submitted by Clarence Boje on Thu, 2016-09-29 15:38

A surviving spouse has inherited her deceased husband’s TIRA’s and RIRA’s and  has “made them her own”and moved them into her own TIRA and RIRA accounts.Both husband and wife started conversions to RIRAs over 5 years ago. Are ALL RIRAs now considered acceptable for qualified distributions ? She plans on leaving her TIRA’s and RIRA’s to her 4  children who have set up separate inherited IRAs.She wishes to make yearly conversions to RIRA’s.Is there any penalty by the IRS for the RIRA  distributions taken from conversions made LESS THAN 5 YEARS before her death ?

Submitted by Alan - IRA critic on Thu, 2016-09-29 17:38

  • If this is the same couple as above, the surviving spouse has had her own Roth IRA over 5 years and is well over 59.5. Therefore, her Roth IRA is fully qualified and any Roth she rolls into her own Roth would also become qualified. Any conversions done into her Roth are also qualified immediately and can be distributed without tax or penalty at any time. She can totally forget about 5 year requirements from here on.
  • I think you meant that her children WILL have to set up inherited IRAs at her death, not that they have already done so. That would be premature as unfunded inherited IRA accounts could incur fees.

Submitted by Clarence Boje on Thu, 2016-09-29 20:03

Her children can also forget about the 5 year requirement ?

Submitted by Alan - IRA critic on Thu, 2016-09-29 21:18

Yes, they can. However, they will have to take out annual RMDs based on the life expectancy of each child using their ages at the end of the year following the year of mother’s death. Once they determine the initial divisor for their first RMD, that divisor is reduced by 1.0 for each year thereafter. All distributions are tax free and reported only on line 15a of Form 8606.

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