Yesterday’s Slott Report on Delaying Spousal Rollovers
Could you provide some clarification regarding the option for a spouse beneficiary to keep the assets in a beneficiary IRA and then do a spousal rollover after 59.5?
You mention she could wait 20+ years to do the rollover to her own IRA. Due to the SECURE Act, wouldn’t she be required to distribute the entire balance within 10 years?
Permalink Submitted by Alan - IRA critic on Tue, 2021-07-13 16:47
The surviving spouse is an EDB and can stretch the RMDs using her single life expectancy, but when the deceased spouse passed prior to RBD, she also has a choice to opt for the 10 year rule. If using her life expectancy and if she is the sole beneficiary, the LE RMDs do not start until the deceased spouse would have reached 72. Regardless of which method she elects, she has the option to assume ownership at anytime. In any year after the year of spouse’s death that she assumes ownership, she is treated as if she owned the IRA the entire year. Her RMD for the year the inherited IRA is assumed is calculated using the Uniform Table which produces a much lower RMD than the single life table.
Now suppose she has elected the 10 year rule. This election must be made by the end of the year following the year of spouse’s death. The risk here is that she fails to elect ownership until after the 10th year has ended. If this happens, she cannot assume ownership because the entire balance is treated as the final year RMD and she cannot roll over an RMD. To be clear, she is OK if she assumes ownership IN year 10 or earlier, but not after year 10. So if she elected the 10 year rule, she could wait a max of 10 years, but not 20.
If she opted for LE RMDs, once they start she could assume ownership at anytime in which case the owned IRA RMD rules would apply effective in that year.