Inherited spousal 60 day indirect rollover rule
If I have a variable annuity inherited ira in my deceased husband’s name and me as beneficiary can I cash out and under 60 day rule put into an IRA in my name without paying taxes?
thanks for quick response…current varible annuity company (it was a 20 year stretch) would not move to my name as a regular traditional…I think I can cash out with no withholding and establish one in my name this way as over 65 and no other rollovers in last 12 months…thanks
- If you take the distribution, be sure to clearly decline any withholding as the default withholding rate is 10% if you do not specify otherwise. Using a 60 day rollover means that you cannot do another such rollover in the next 12 months.
- Another issue relates to RMDs. If husband was taking RMDs and did not complete his RMD for the year of death, you must complete that RMD. Further, your own beneficiary RMDs must be considered because if you take a distribution, the amount of your beneficiary RMD (if any) will not be eligible for rollover. Conversely, the election of ownership which the insurance company will apparently not recognize would avoid a beneficiary RMD since there would be no distribution, just a non reportable transfer.
- If husband passed prior to his RBD (required beginning date for RMDs), then you are not required to take beneficiary RMDs until the year he would have reached RMD age. To be more specific due to changing RMD ages recently enacted, I would need to know his DOB and DOD.
I really appreciate your info …DOB was 2-23-43 and DOD was 4-16-2014 and he did take RMD in year of death..spouse was taking a 5% withdrawal annually and will continue..thanks again
OK – you needed to take annual beneficiary RMDs starting in 2015 based on your age in 2015. When you are referring to a 20 year stretch, is that based on the IRS RMD table divisor applied to the account balance at the end of each year, or has the IRA annuity actually been annuitized for 20 years?
I don’t think it was annuitized as can get remaining amount with no surrender charge…It was based on a guaranteed payout of 5% for 20 years….I did notice however they added an additional amount in the payout last year because it has performed well…again many thanks
Whether the annual payments over the last few years actually met your RMD is dependent on the insurance company’s valuation of the annuity (assuming NOT annuitized) including any fringe benefits that would have to be added to the year end balance to determine the RMD. However, the beneficiary RMD % increases each year as your age increases, so eventually the 5% would fall short of your RMD. If you do the 60 day rollover to an IRA, they will have to disclose to you what your 2023 beneficiary RMD is, and that amount would not be eligible for rollover to your own IRA. Owner RMDs for the rollover would begin in 2024 using the Uniform Table, which produces a lower RMD than the single life table that applies to beneficiaries. It’s not clear whether the amount added to your payout last year was due to RMD compliance or some other factor.
Permalink Submitted by Alan - IRA critic on Wed, 2023-03-15 18:52
Yes, but you are subject to the one rollover limitation over a 12 month period. Therefore, if you take a distribution you will not be able to do another 60 day rollover in the next 12 months. Further, if you are under 59.5 and need distributions you would be subject to the 10% penalty if taken from an IRA you own. If you want to avoid a distribution and having to report it on Form 1040, you could elect to assume ownership of the inherited IRA annuity, then do a non reportable transfer to your own IRA that would usually be originated through the custodian you will use for your own IRA.