Hi. Husband named his spouse as primary bene. of his IRA. He passed away at 62. She is 57. She is going to need $ to live on. Will she be able to take withdrawals from the IRA after she claims ownership without the 10% penalty? When claiming ownership, would spousal continuation be the best option, giving her the most flexibility?
So, the spouse will not have to begin taking RMD payments, since her husband was 62? The option that resembles a bene IRA at the annuity company where the IRA is currently held is Life Expectancy for Spousal Beneficiary. It says to complete this form if you want to withdraw a series of payments over your lifetime, but then there is an option to defer taking a distribution until the year the deceased would have attained age 70 1/2. Does this sound like the right option?Also, didn’t know you could change from Bene. IRA to own IRA after turning 59.5.
A spousal beneficiary can roll over the inherited IRA whenever they choose to including before or after beneficiary RMDs must begin. In this case, the RMD option deferring the start of RMDs until deceased spouse would have reached 70.5 is the correct option for RMD purposes. However, the surviving spouse needs to be sure that this option does not lock them into a decision to annuitize the IRA at that time unless they want to, and that they can still take distributions if they need them. Does the spouse want to remain with this annuity product or would thay rather transfer the inherited IRA to another non insurance custodian?
Insurance companies don’t always give you all of the choices that the law allows. Can she move the inherited IRA to a different financial institution. That might give her more flexibility. It would also avoid the ongoing costs of the annuity.
Permalink Submitted by Alan - IRA critic on Wed, 2017-07-05 17:51
Until she reaches 59.5 she should not roll the account over or assume ownership of the IRA and should keep it titled with her as beneficiary so her distributions will be penalty free. She will not have any beneficiary RMDs until husband would have reached 70.5. However, once she reaches 59.5 she should make the inherited IRA her own because she can take penalty free distributions after 59.5 when she needs them and her own RMDs do not begin until she reaches 70.5.