Deceased Spouse IRA

Submitted by David Berdow on Fri, 2020-02-07 14:55

A recent client advised his late wife who passed a decade ago had multiple IRAs and a workplace retirement plan and he never settled her estate. He is the primary beneficiary of the plans with the children as contingent. He will be meeting with an attorney to formally settle her estate. What do I need to know about unwrapping this or once he advises the custodians can he just roll the plans over into his IRA’s or separate ones (he recently remarried and there is a premarital agreement in place). He is under the age of 59 1/2 and if she was still with us would have been under 59 1/2 as well. Are there any penalties due to how long this has taken?



Submitted by Alan - IRA critic on Fri, 2020-02-07 18:40

  •   Delaying this long is clearly an unwise decision and client will be fortunate if these accounts have not been escheated to the state by now. If he has moved, mail addressed to his wife might have been returned to sender. Since wife passed prior to her RBD, the beneficiary clause of each account needs to be checked to determine whether the 5 year rule has been automatically applied. 
  • There weren’t any beneficiary RMDs required if he is not subject to the 5 year rule and there is no deadline for a spousal rollover.  However, in this case, the 5 year rule is almost beneficial since by not distributing the the IRAs at the end of the 5 years, he will become the default owner of the IRAs and therefore would only need to re title them to reflect this. But any non IRA workplace plans do not qualify since he cannot become the owner of those plans.

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