Inherited IRA

Submitted by Thomas Ausfahl on Wed, 2019-03-13 21:05

I have read the IRS guidance, as well as relevant topics on this forum, and am still somewhat confused. Situation is as follows: Surviving spouse is sole and 100% beneficiary of his deceased wife’s traditional IRA. Surviving spouse is age 92 (6 years older than deceased wife).

1) If surviving spouse assumes ownership, must he use his own age (in the year after the year of death) using Table 3 to begin calculating the RMD (or is he allowed to calculate the new RMD going forward using his wife’s RMD calculation each year as if she were still alive?).

2) If surviving spouse elects to take an inherited IRA, my understanding is that the RMD can be calculated using Table 1, based on the deceased spouse’s age in the year following the year of death and then reducing the divisor by “1” each subsequent year? Is this correct?

3) The surviving spouse’s daughter will be primary beneficiary. My understanding is that when she inherits the IRA she will need to continue taking RMD’s based on the same RMD calculation methodology in place when her father passes. Is this correct?

Thanks so much.

Tom



Submitted by Alan - IRA critic on Wed, 2019-03-13 22:27

  1. He is allowed to use the single life expectancy of his wife under Table I  and keep the IRA inherited, but that would be the wrong choice compared to assuming ownership of the inherited IRA. Starting the year after death, the RMD would be much lower as the owner using the Uniform table with his age, even though older than his wife. Further, should he pass with an inherited IRA, his own beneficiaries will not be treated as designated beneficiaries, but as successor beneficiaries to him and their stretch would be mostly eliminated.
  2.  Almost. Table I would apply with the divisor for the first beneficiary RMD being figured from the age of the wife when she passed, and reduced by 1.0 each year. The 1.0 reduction each year always applies when a decedent’s age is being used. For example, if she passed at 86, the divisor is 7.1 but she would have been 87 for the first beneficiary RMD, so the divisor for that year would be 6.1, then 5.1 etc. But with the 1.0 reduction in about 3 years, the RMD would be lower by switching to HIS age because there is no 1.0 reduction for a sole surviving spouse and he would enter the Table I every year. But all this really does not matter because he should immediately assume ownership and start using Table 3 for the year following her death. RMDs will be much less and easier to determine.
  3.  No. If he assumes ownership and names his daughter as beneficiary, she will be a designated beneficiary and will use her own age for the Table I divisor. As indicated above, if she inherits an already inherited IRA because he did not assume ownership, she will have almost no stretch since she will have to continue his RMD schedule.
  4.  Large advantage to him assuming ownership ASAP and naming daughter beneficiary. Lower RMDs for him and for daughter after she inherits. But note that for the year of death he is also responsible for completing wife’s RMD for that year if she did not complete it.
  5.  You are right – the rules in this scenario can be confusing.


Submitted by Thomas Ausfahl on Thu, 2019-03-14 12:20

Thank you so much.  You have been incredibly helpful.  Tom 



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