Spouse IRA Beneficiary (younger than 59 1/2)
Question: husband dies, wife is 54. Husband’s IRA is large and the wife may (or may not) need to tap into it. Under the new beneficiary rules, would it be wise to have her receive the funds into a beneficiary IRA, not take any RMDs (unless she needs money), then move the funds to her own IRA after she turns 59 1/2? Let’s say she doesn’t WD any funds while it’s a beneficiary IRA, is she still compliant under the new rules? Secondly, what happens if she is, say, 35? Is there a provision under the new rules whereby she can assume the funds as a beneficiary IRA, but avoid the 10 year close out rule because she is still the spouse beneficiary?
Thank you
Permalink Submitted by Alan - IRA critic on Fri, 2020-09-11 21:12
WIfe’s beneficiary RMDs do not begin until the year husband would have reached 72 if he was not already subject to RMDs. Wife should maintain the IRA as inherited in at least the amount she may need to tap before 59.5. For example if the inherited IRA is worth 1mm and she is sure the most she would ever need from it before 59.5 was 200k, she could do the spousal rollover of 800k and leave the 200 in the inherited IRA. Again, considering husband’s age she needs to determine when her beneficiary RMDs must start, because that could affect how much she rolls over to her own IRA. This complies with the Secure Act rules, which did not affect surviving spouses since surviving spouses are “eligible designated beneficiaries”, meaning they can still use life expectancy or husband’s age to determine RMDs. The 10 year rule does not apply to spouses.