Strech IRA Options
A husband has an IRA with the primary beneficary being the wife and the contingent beneficary being 50% children and 50% grandchildren.
In regards to a strech IRA, how will the RMDs be calculated once the wife passes away and children and grandchildren become the owners of the IRA?
Is it calculated based on the age of the children, grandchildren or both?
Is this the best way to have your beneficaries’ set up if the IRA will be used as a strech IRA?
Permalink Submitted by mk foss on Mon, 2008-10-27 17:12
If the spouse survives the owner of the account, the identity of the original contingent beneficiaries is meaningless. The spouse’s life expectancy would be used. In order for the children and grandchildren to receive any of the benefits the surviving spouse would need to add them as beneficiaries to an inherited account.
If the spouse-beneficiary predeceases the owner of the account, the contingent beneficiaries inherit. The IRA can be split so that each child and grandchild has an IRA and can take distributions based on their own life expectancy. If the IRA is not split by December 31 of the year following the death of the owner, the life of the oldest beneficiary is used.
If the spouse-beneficiary does not predecease and rolls over the IRA at the death of the original owner, she/he will need to add beneficiaries so that they can get the tax treatment described in the paragraph above. The contingent beneficiaries on the first account NEVER carry over automatically.