Surviving spouse (< 59.5)
Good Morning
Facts:
Deceased spouse, 68, leaving his IRA to his spouse, 55
Spouse may need to withdraw assets prior to attaining 59.5
Please confirm/comment:
The surviving spouse retitles the IRA as an inherited IRA.
The 10% penalty would not apply as the withdrawal would a distribution due to death
My thought is to have the IRA remain as an inherited till the deceased spuose would have reached his RBD then roll it into the suriving spouses own IRA or make the inherited their own.
Again, thanks in advanceBrian.
Permalink Submitted by Alan Spross on Fri, 2012-02-24 17:09
Yes, you are correct.
The surviving spouse can take penalty free distributions until she is 59.5, and can then roll the IRA over to her own IRA. However, the surviving spouse must also start RMDs as a beneficiary in the year the decedent would have reached 70.5. She would be 57 that year and must take an RMD based on her recalculated life expectancy. That means that she would use the divisor for age 57 in the SIngle LIfe table for the first year, and in the second year she uses the divisor for age 58 instead of reducing the prior year divisor by 1.0. A sole beneficiary spouse can do this, but a non spouse beneficiary must reduce by 1.0.
Once she reaches 59.5 and rolls the IRA into her own IRA, her beneficiary RMD for that year is erased since she is deemed to have owned the IRA the entire year for RMD purposes. Also, if she fails to take an RMD required as beneficiary, she defaults into ownership status and that could subject her to the penalty.
She should name her own successor beneficiary at the same time the original IRA is re titled in beneficiary format, and also determine if she inherited any basis in the IRA. Check to see if husband filed an 8606 in the past.