RMD of Spouse beneficiary
My 80 year old mom has been established as beneficiary of a small % of a large profit sharing account and the entire balance of another small profit sharing account from my dad who died in 2007 and who was already taking RMD’s. This is the first year of RMD’s for my mom on these accounts.
Should she use the Single Life Expectancy Table to determine her factor or is there another table meant for spouses?
Should she reduce the factor by one each year in the future or could she use the factor off the table each year that coordinates with her age and is larger, allowing her to further stretch her distributions?
Permalink Submitted by Alan Spross on Fri, 2008-10-24 19:57
There are a couple arcane situations at work here. So need to know the age your father would have attained at the end of 2007, and whether he was still working in 2007.
Different rules apply to accounts where the surviving spouse is the sole beneficiary and apparently that only applied to the small plan.
Permalink Submitted by Ilene Plave on Sun, 2008-10-26 18:50
My dad was 81 when he died in July of 2007 and was still working at that time. Can my mom “recalculate” her factor each year on the smaller plan that she inherited in its entirety? Also, is the Single Life Expectancy Table the correct one to use? Thank you for responding 🙂
Permalink Submitted by Alan Spross on Sun, 2008-10-26 22:08
She should do a direct rollover of her interest in these plans to her own IRA, and then she can take RMDs using Table III. This table will have the lowest RMD and she will also have the benefit of recalculation of her age each year, just by using the divisor shown for her age. For example, if your Mom’s attained age this year is 80, she will use a divisor of 18.7 and the account value as of 12/31/07.
If she continued as a beneficiary only on the current plans, she would have to use Table I and without separate accounts, any other younger beneficiairies would have to use (her) the life expectancy of the oldest. Therefore, having her do the rollover may also help the other beneficiaries, and 12/31 of this year is the deadline to help those other beneficiaries.
Doing the rollover will also allow her beneficiaries to get a full stretch after she passes, rather than being treated as successor beneficiaries.
Permalink Submitted by Ilene Plave on Mon, 2008-10-27 18:13
The larger profit sharing account was split into 4 separate inherited “for Benefit of” type accounts, one of which belonging to my mom, earlier this year. The smaller account was placed in a similar type of inherited IRA account also this year. Can we still rollover both of these balances to new (or possibly already established) personal IRA’s of my mom at these or other institutions before the end of the year, or is it too late?
Permalink Submitted by Alan Spross on Mon, 2008-10-27 18:49
No, it’s not too late at all. For a spouse beneficiary, the rollover can be done at anytime, and starting with an inherited separate account does not disqualify a later rollover to her own IRA.
The rollover to her own IRA can be with any qualified IRA custodian and either to a new or existing account. The RMD for 2008 should actually be withheld and distributed separately from the plan and should not be rolled over to the IRA, because the surviving spouse is treated as the employee in this respect.