SURVIVING SPOUSE DID NOT ROLLOVER OR TAKE OWNERSHIP OF IRA

Husband died in 2009 and took his RMD when required. His sole beneficiary was his wife. The IRA was never rolled over to the wife , or the wife was not treated as the owner of the deceased spouse’s IRA. It stayed in the Husband’s name and social security #. RMD’s have been made by the broker in 2010 and 2011 on a 1099 under husband’s name and social security # using the Uniform LifeTime Table. (1) What are the default status on the IRA if surviving spouse did not make any elections regarding husband’s IRA . If the default status is as a beneficiary, will surviving spouse have penalties because the broker used the Uniform LifeTime table instead of the Single Life? (2) What penalties is the surviving spouse subject to because the IRA is still in her deceased husband’s name?



The IRA is considered inherited, however the account defaults into ownership status for the surviving spouse if she fails to take the full RMD required as the beneficiary. As beneficiary, her RMD would be higher than the amount that has been distributed unless she is around 13 years or more younger than he has. She has been in constuctive receipt of the distributions that have been issued post death.

In the first year the IRS defaults to ownership status for her, the RMD is based on her age using the Uniform Table. If she is younger, there might not even be a shortfall, but if refiguring the correct RMD under the default rules still produces a shortfall, all she has to do is make up the shortfall right away, and file Form 5329 for the respective year of the shortfall and request the IRS to waive the penalty for “reasonable cause”. The 5329 should be completed according to the Inst for Form 5329, p 6. The explanation should include the details of distributions made under his SSN.

There may be other tax related issues if she has not reported his death to SSA or filed a 1040 showing him still living after his death. However, the chances are very good that any RMD shortfall excise taxes will be waived by the IRS. First order of business is to get the IRA properly titled as owner if the IRA has defaulted to ownership status due to the first RMD shortfall. If it has not because she is more than 13 years younger, then she can continue the IRA as inherited if there is a benefit of doing that, eg if she were younger than 59.5.

She also needs to name her own benficiary on the IRA ASAP.



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