RMD When Transferring IRA to Spouse

Submitted by Michael P. Cress on Fri, 2024-01-19 21:50

Client died 1/2022, age 97. Spouse (age 90) has not yet transferred acct to her name. Against my advice, spouse waited to take 2022 RMD until Dec 2023, using deceased husbands age and 12/31/22 acct balance. Did not make any distribution for 2023 RMD. If spouse transfers acct to her name now, what about 2023 RMD? Should it have been taken by 12/31/23 based on husbands age? Should she take 2023 RMD prior to transferring acct to her name? Penalty?



Submitted by Alan - IRA critic on Fri, 2024-01-19 23:07

  • The 2022 year of death RMD was taken late, so spouse will have to file a 5329 for 2022 to request the penalty waiver. Further, the 2023 beneficiary RMD was missed, and that means that the spouse has defaulted to ownership status rather than beneficiary. This is fortunate because her 2023 RMD as the owner is calculated from the Uniform Table, which is lower than her beneficiary RMD would have been. But this RMD was also missed so she must make up the 2023 RMD using the Uniform Table and file a 5329 with her 2023 tax return requesting that this penalty be waived. Before she can file the 5329 she must have made up the 2023 RMD.
  • She should tell the IRA custodian that she defaulted to ownership due to failing to take the 2023 beneficiary RMD, and the custodian should process an election of ownership, which involves transferring the balance to an IRA she owns. This is not a taxable or reportable distribution, just a transfer. This transfer should be done prior to any distributions, and then she can make up the 2023 RMD and take the 2024 RMD later on this year. If the 5329 forms are filed correctly, the IRS will waive the penalty. Her reasonable cause simply be that she did not understand the RMD rules. Both the 2023 RMD and 2024 RMD will be taxable in 2024.

Submitted by Michael P. Cress on Sun, 2024-01-21 22:35

Great info! Thank you!  Since 2022 Yr of death RMD was not taken until 12/2023, is there any adjustment needed to 12/31/22 value in determining RMD for 2023 (same question would apply to calculating 2024 RMD)?

Submitted by Michael P. Cress on Mon, 2024-08-26 09:45

RMD WHEN TRANSFERRING IRA TO SPOUSE

Submitted by Michael P. Cress on Fri, 2024-01-19 21:50

Alan, I am very appreciative of your initial response and would be grateful if you could share any additional insights related to my 8/23 follow-up.

Submitted by David Mertz on Mon, 2024-01-22 00:01

Year-end values are not to be adjusted for late-taken RMDs.

Submitted by Michael P. Cress on Fri, 2024-08-23 16:16

The client did not file form 5329 with her 2023 tax return and no action has been taken to transfer assets from the deceased spouse or tell the custodian to process an election of ownership.  Since she has basically done nothing since the original post I made above, are there any additional action steps that need to be taken or a different sequence of steps?

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