Inherited IRA Ex Spouse

Submitted by Beza Asrat on Tue, 2023-11-28 00:26

Husband passed away in 2020 and was born March 14 1969, beneficiary of his 401K is his ex-wife. Since they got legally divorced she is no longer eligible designated beneficiary rather a designated beneficiary right ? and will be subject to the 10-year rule. He had not been taking RMD because he was younger than the age requirement. Therefore, she will need to withdraw the entire balance of the 401k by Dec 31st of the 10th year anniversary right? Is she required to take distribution from 1st to 9th year? or as long as she withdraw the entire balance by the 10th year she will be good right? Per publication 590-B looks like the beneficiary is allowed but not required to take distribution right? Thanks.



Submitted by Alan - IRA critic on Tue, 2023-11-28 01:45

  • The ex wife is not an EDB as a spouse, but might she be an EDB by not being more than 10 years younger than ex husband?  
  • If she is more than 10 years younger and therefore subject to the 10 year rule, she will have to drain the inherited IRA by the end of 2030, but does not need to take annual RMDs in years 1-9. And even if she does not need to take annual RMDs in those years, she might benefit from taking some distributions to avoid a large taxable lump sum distribution.

Submitted by Beza Asrat on Thu, 2023-11-30 17:49

Thank you for the response. So if I understand what you said if she is not more than 10 years younger she is not subject to the 10-year rule? But she is an Ex-Wife does the age matters since they got divorced when he passed away? She is born in 1972 so she is only 3 years younger. Thank you

Submitted by Alan - IRA critic on Thu, 2023-11-30 18:27

She is less than 10 years younger than the decedent, therefore she is an EDB who can take life expectancy RMDs instead of the 10 year rule. She is treated just like any non spouse beneficiary who is not more than 10 years younger than decedent.

Submitted by Beza Asrat on Thu, 2023-11-30 19:01

Thank you for taking your time answering this question. Appreciated.

Submitted by Beza Asrat on Fri, 2024-02-02 20:23

Per the above she is EDB and can take life expectancy RMDs instead of the 10 year rule. Does this mean she has to wait until she reaches RMD age? or she has to take distribution before that age? if so, when is the begining date? Thanks

Submitted by Alan - IRA critic on Fri, 2024-02-02 21:41

Under IRS rules for EDBs, she should have taken a beneficiary RMD in 2021, 2022, and 2023. However, a 401k plan might be more restrictive, and have either a 5 year rule or a 10 year rule, or a beneficiary option with a deadline. If the plan did not distribute annual RMDs, she might have defaulted into either the 5 year rule or the 10 year rule for that plan. Therefore, she needs to contact the plan to determine her RMD options.

Submitted by Beza Asrat on Thu, 2024-02-22 15:56

But her ex hasband passed away before  he reaches RMD age and he was not taking RMD. So my understanding was she is not subject to 10 year rule as she is only 3yrs younger than him and she is EDB. However, she will be subject to life expectancy RMD and i was trying to understand the life expectancy RMD. Is this the same as 10 year or 5 year rule? I thought that was based on her life expectancy? Can you please clarify this to me? Thank you.

Submitted by Alan - IRA critic on Thu, 2024-02-22 16:48

From your original post, it is not clear whether she inherited a 401k or an IRA and if a 401k whether it was rolled over to an inherited IRA and when. This could make a difference.
But assuming that she is an EDB, her beneficiary RMDs are based on her single life table age in 2021. Then in 2022 the tables were changed and her divisor should be reset to those of the new tables. These divisors are the same as she would use IF the 10 year rule applied and ex passed after the RBD, but since he did not there would be no annual RMDs for her even if the 10 year rule was required under a 401k.
Again, if she inherited an IRA and not a 401k, the 10 year rule would never apply unless SHE opted out of EDB treatment and into the 10 year rule. There is no reason to think that she did that.

Submitted by Beza Asrat on Thu, 2024-02-22 16:59

Sorry my origional post was not clear but she interited 401K, so if the 10 year rule doesn’t apply to her when she should take the distribution? when she reaches RMD age or starting from 2023? or she shoud have taken 2021, 2022 and 2023 and she will be penalized for not taking? I’m still lost on life expectancy RMD. Thank you

Submitted by Alan - IRA critic on Thu, 2024-02-22 18:05

She should have started RMDs in 2021 based on her age in 2021 using the single life table in force at that time, then reset the divisors to the new table in 2022. Each year after 2021 should have the divisor reduced by 1.0 from the prior year. The 401k should have been distributing the proper RMD  on their own. The plan has not been doing that?

Submitted by Beza Asrat on Thu, 2024-02-22 18:37

No she has not received any RMD yet. So she should contact them? Will she be penalized? 

Submitted by Alan - IRA critic on Thu, 2024-02-22 20:34

If she makes up the missed RMDs and files a 5329 for 2021 through 2023, the IRS will waive the penalty. But it’s odd that the plan did not distribute those RMDs as an EDB as the plan knows both the age of the participant and the beneficiary. 

Submitted by Beza Asrat on Thu, 2024-02-22 21:40

Thank you. She already filed her tax return for 2023. So another option she has is taking the entire balance by end of 5th year following year of ex-husband death which is 2024 (he passed away in 2019) right? Or can she amend and file form 5329 for 2021 through 2023 missed RMDs? Thanks so much.

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