Inheriting an IRA from a Spouse – Treat as Beneficiary or Owner?

Submitted by Glenn Andrade on Mon, 2017-01-23 23:55

I’m working with a client whose mother passed away in 2013. She was the beneficiary of mom’s IRA, that mom had previously inherited from her husband (my client’s father). Basically, my client is a Successor Beneficiary. The way the account was originally established when mom inherited it was as a Beneficiary…not an owner. As such, the factor to determine RMDs was pegged at 8.6 (mom’s age the year after her husband died), and was set to be decreased by a factor of 1 every subsequent year. Following this formula, the Inherited IRA will be depleted in 9 years from date of inheriting it.

As it worked out, Mom died one year after her husband, with my client listed as the beneficiary of the IRA. The firm has continued to take distributions at the same speed as set before…using a factor of 7.6 in 2014, 6.6 in 2015 and 5.6 in 2016. At this rate, my client will have to drain the IRA over the next five years. Had the financial institution originally set the account up as mom as the OWNER when dad died, she, and thus my client, could have used the less aggressive life expectancy schedule as outlined in Table I of Pub 590…allowing the RMDs to be stretched over a greater period of time.

My question is this: How does a surviving spouse “Declare” that they would like to be treated as the Owner, and not a Beneficiary of an IRA, and thus be subject to a less aggressive Life Expectancy table? Am I wrong to think that had mom been treated as an Owner, her RMDs would have been calculated using the less aggressive LIfe Expectancy schedule? And, if that were the case, wouldn’t my client be able to continue those RMDs based on mom’s factors?



Submitted by Alan - IRA critic on Tue, 2017-01-24 00:19

  • Yes, if Mom had assumed ownership of the IRA or rolled it over to her own IRA titled with her as owner, your client would now have a new stretch using her own age at the end of 2015. In other words, your client would be the designated beneficiary rather than a successor beneficiary.
  • If Mom was more than a year older than Dad, her RMDs as beneficiary could have used Dad’s age. I assume that Dad died after his required beginning date. And if Mom were able to use Dad’s age your client would continue that with the 1.0 annual divisor reductions. You might check this out if Mom was older than Dad.
  • There is another possibility, but I doubt that it can apply here because it sounds like Mom passed before the end of the year of her first beneficiary RMD. But had she lived to the end of that year and FAILED to take the full RMD as beneficiary, she would have defaulted to ownership of the IRA regardless of how it was titled. But Mom would have had to live into 2015 because she is not deemed to have taken less than her beneficiary RMD since her death cannot result in a failure to complete that beneficiary RMD. If you think this rule might apply, please advise as it would substantially lengthen the stretch for your client.

Submitted by [email protected] on Tue, 2017-01-24 14:53

Isn’t it the case the a spousal beneficiary gets to recalculate RMDs?  If that’s the case, and they insist that it was a beneficial IRA and NOT assumed as owner, then at least the stretch would be a little longer? – m

Submitted by Bruce Steiner on Tue, 2017-01-24 15:10

  • It wasn’t the financial institution that didn’t roll it over.  It was Mom who didn’t roll it over.  
  • Where was the lawyer who was handling Dad’s estate?  Why didn’t he/she advise Mom as to the IRA?

Submitted by Alan - IRA critic on Tue, 2017-01-24 17:55

m- yes, a sole spousal beneficiary can recalculate (re enter the table for the divisor each year), and that does add to the stretch at an accelerating rate the longer the beneficiary lives. In fact, if RMDs start using the age of the decedent  (non recalculated) when the surviving spouse is older, the RMD may change in later years to the age of the surviving spouse since recalculation each year may eventually make the RMD smaller by switching to the surviving spouse’s age. Of course, assuming ownership will usually result in the smallest RMD unless the surviving spouse is much much older than the decedent.

Submitted by David Mertz on Tue, 2017-01-24 18:12

Given that Mom only lived for a year after Dad died, presumably Dad died in 2012.  That means that Mom had only one RMD as beneficiary (for 2013) and never had the opportunity to recalculate.

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