Spousal Bene IRA RMD Question

Submitted by Adam Bunday on Tue, 2018-12-04 16:41

My client is age 70 this year and her husband would have been 70 1/2 this year. He passed last year and she setup the spousal beneficiary IRA as opposed to rolling it into her own account. The custodian of the account is sending her the RMD for the account this year, but she wants to defer until next year due to taxes on several other withdrawals. It appears that the bene IRA will not allow her to delay until April 1 of next year so she wants to rollover the spousal bene IRA to her own IRA this year. If she does that, will the IRS allow her to delay taking her RMD until April 1 of next year or will they require the RMD this year since it was already due this year from the bene IRA? She understands she would have to take a second RMD by 12/31/19.

Thank you very much!



Submitted by Alan - IRA critic on Tue, 2018-12-04 17:39

  • Yes, once she has assumed ownership of the inherited IRA she is treated as having owned it the entire year. As the owner she can defer all or part of her 2018 RMD into early 2019 no later than 4/1. That said, if she will not reach 70.5 this year, then 2018 is not even an RMD distribution year for her.
  • To avoid exposure to the one rollover limit, the best way to handle this is have her first notify the custodian that she is electing to assume ownership. The custodian can then do a non reportable direct transfer to a new owned IRA account under her SSN. If she were to take an actual distribution and roll it over, there would be a 1099R issued that would use up her one permitted rollover for 12 months – and if she already used the rollover it would be a taxable distribution per PLR 2017 07001.
  • You indicated the custodian is sending her a beneficiary RMD?  An IRA custodian should not be forcing out any RMDs without the beneficiary requesting a distribution. If they distribute a beneficiary RMD with a code 4 she cannot roll any of it back to the IRA, not even the excess over an owner’s RMD. Therefore, she needs to stop this beneficiary distribution if at all possible.

 

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