Can a younger spouse use the new 10-year payout RMD rule initially for inherited IRA and then switch to her own IRA at age 59 /1
80 year old IRA owner dies in 2021, spouse is age 56 (under age 59 1/2) so elects to inherit the spouses IRA to preserve early access to the money without a penalty. Can she use the new 10-year RMD Rule to not begin RMD distributions now…then when she attains age 59 1/2 she would rollover the inherited IRA to her own IRA and then use her own age to postpone distributions until she hits age 72 ? She effectively eliminates RMDs until age 72??
Permalink Submitted by Alan - IRA critic on Thu, 2021-12-23 20:25
She could have if the deceased spouse had passed prior to his RBD, but he passed after his RBD. Therefore, the surviving spouse is best served by taking life expectancy RMDs until she reaches 59.5 or his positive that she will need no more distributions until 59.5. At that point she could assume ownership of the inherited IRA and there would be no RMD for that year since she would be treated as owning the IRA the entire year. But she also needs to know that the first year she fails to take her full RMD as beneficiary will result in defaulting to ownership status for that year.
Another plan if she wants to reduce the RMDs is to transfer a portion of the inherited IRA to her own IRA and in the following year the transferred balance would not be subject to RMDs. This would reduce the RMDs on the portion left as inherited. Of course, this plan depends on how much she might need relative to the balance retained in the inherited IRA until she elects ownership.