RMDs with inherited spousal IRA

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samsmith
Posts: 126
Joined: Sun Mar 15, 2015 9:33 am

RMDs with inherited spousal IRA

Post by samsmith »

Unfortunately, my mother passed away towards the end of December and she had a small IRA at a local bank (in a CD which comes due in several weeks) with my Dad as the primary beneficiary. My mom had taken her RMD prior to her death in 2017.
  • not really a huge issue, but does my Dad have to count the amount in this IRA towards his 2018 RMD calculations - even though he did not have time to transfer it to his IRA or take a distribution as of 1/1/2018. My guess is yes.
  • The main question is really this. My Dad wants to get a check from the local bank for the CD value and count that check as part of his RMD for 2018. Any sense if that is OK? I keep thinking he needs to first transfer the IRA to his name (using the special spousal rules) and then he can take the distribution. He thinks it does not matter and the bank said, since he is the primary beneficiary they will write him a check. I don't want to argue with him about this - unless absolutely necessary. Any thoughts.
Alan S.
Posts: 9975
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: RMDs with inherited spousal IRA

Post by Alan S. »

samsmith wrote: Sun Jan 28, 2018 10:58 pm Unfortunately, my mother passed away towards the end of December and she had a small IRA at a local bank (in a CD which comes due in several weeks) with my Dad as the primary beneficiary. My mom had taken her RMD prior to her death in 2017.

Sorry to hear of your loss.
  • not really a huge issue, but does my Dad have to count the amount in this IRA towards his 2018 RMD calculations - even though he did not have time to transfer it to his IRA or take a distribution as of 1/1/2018. My guess is yes.
If your Dad assumes ownership of the inherited IRA anytime in 2018, his RMD on this balance will be considerably lower than if he continued it as an inherited IRA. Either way, the 12/31/2017 balance is used to calculate the 2018 RMD.
  • The main question is really this. My Dad wants to get a check from the local bank for the CD value and count that check as part of his RMD for 2018. Any sense if that is OK? I keep thinking he needs to first transfer the IRA to his name (using the special spousal rules) and then he can take the distribution. He thinks it does not matter and the bank said, since he is the primary beneficiary they will write him a check. I don't want to argue with him about this - unless absolutely necessary. Any thoughts.
Yes, you are correct about spousal assumption of ownership. He can count the distribution toward his 2018 RMD and roll over the non RMD remainder since the entire CD will be much larger than the RMD, but FIRST he needs to notify the inherited IRA custodian that he wishes to assume ownership of the inherited IRA. It is then retitled as his and his 2018 RMD is calculated using the Uniform Table for owners rather than Table I for beneficiaries. The RMD will be much lower. Further, since he is subject to RMDs, he should assume ownership so that his beneficiaries (probably you) will be treated as designated beneficiaries should he pass. If he maintains this as an inherited IRA, takes inherited IRA higher RMDs, should he pass then his named beneficiaries will be treated as successor beneficiaries. That means they would have to continue his higher RMD schedule and could not use their own age to calculate their RMDs. Therefore, assumption of ownership is beneficial on all fronts, and has no drawbacks.
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