Inheriting an inherited IRA

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jon-nyc
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Inheriting an inherited IRA

Post by jon-nyc » Tue Nov 26, 2013 11:15 am

Say I have an inherited IRA from a parent. Then at some point I die and my wife inherits the inherited IRA.

My understanding is her RMD schedule would be the one I was on, that it wouldn't 'reset' based on her life expectancy.

Can anyone confirm this is true or correct me if I'm wrong?

kaneohe
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Re: Inheriting an inherited IRA

Post by kaneohe » Tue Nov 26, 2013 11:45 am

That's my understanding too..........I couldn't find a link that says that tho. Alan S. can give the right answer .....or maybe we can assign this as homework for sscritic :happy

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fire5soon
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Re: Inheriting an inherited IRA

Post by fire5soon » Tue Nov 26, 2013 11:51 am

You are exactly right.
A man is a success if he gets up in the morning and gets to bed at night, and in between he does what he wants to do. - Bob Dylan

minesweep
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Re: Inheriting an inherited IRA

Post by minesweep » Tue Nov 26, 2013 12:26 pm

From Ed Slott's book titled "The Retirement Savings Time Bomb"

Distribution Rules When an IRA Beneficiary Dies
As soon as you inherit an IRA, you should immediately name a beneficiary. That person will be your beneficiary. It it’s a non-spouse, the maximum post-death stretch on the RMD’s will be based on your life expectancy, not your beneficiary’s. If your beneficiary is your spouse (your wife, say) she can roll the IRA to her own IRA and name her own beneficiaries, who would also follow these rules. For the most part, it will be the non-spouse beneficiary who gets the longest stretch IRA.

The general rule is that when a beneficiary dies during his or her payout term and there is still a balance remaining in the inherited IRA, the beneficiary’s beneficiary can complete the remaining term of the deceased’s life expectancy. A beneficiary’s beneficiary cannot tack on his or her own life expectancy to this, however
.
Mike

Calm Man
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Re: Inheriting an inherited IRA

Post by Calm Man » Tue Nov 26, 2013 1:46 pm

I can only imagine how little the long-lasting results were considered or even foreseen when the rules were made. These stretches can last a hundred years or maybe even more if some 80 year old marries a 20 year old. The average person or even sophisticated cannot understand all of the differing rules and regulations with regular and then ROTH IRAs. Hopefully some sense prevails down the road although I am not optimistic.

sscritic
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Re: Inheriting an inherited IRA

Post by sscritic » Tue Nov 26, 2013 1:55 pm

kaneohe wrote:That's my understanding too..........I couldn't find a link that says that tho. Alan S. can give the right answer .....or maybe we can assign this as homework for sscritic :happy

It's in the code. Now if only someone would teach me how to use google. :)

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fire5soon
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Re: Inheriting an inherited IRA

Post by fire5soon » Tue Nov 26, 2013 2:29 pm

minesweep wrote:From Ed Slott's book titled "The Retirement Savings Time Bomb"

Distribution Rules When an IRA Beneficiary Dies
As soon as you inherit an IRA, you should immediately name a beneficiary. That person will be your beneficiary. It it’s a non-spouse, the maximum post-death stretch on the RMD’s will be based on your life expectancy, not your beneficiary’s. If your beneficiary is your spouse (your wife, say) she can roll the IRA to her own IRA and name her own beneficiaries, who would also follow these rules. For the most part, it will be the non-spouse beneficiary who gets the longest stretch IRA.

The general rule is that when a beneficiary dies during his or her payout term and there is still a balance remaining in the inherited IRA, the beneficiary’s beneficiary can complete the remaining term of the deceased’s life expectancy. A beneficiary’s beneficiary cannot tack on his or her own life expectancy to this, however
.
Mike


Assuming I'm reading the Ed Slott quote correctly here, I disagree with him. A spouse can not assume their deceased spouse's inherited IRA into their own. They can only claim it into an inherited IRA in their name as a subsequent beneficiary. A spouse can only assume a deceased spouse's IRA into their own if their deceased spouse is the original depositor.
A man is a success if he gets up in the morning and gets to bed at night, and in between he does what he wants to do. - Bob Dylan

sport
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Re: Inheriting an inherited IRA

Post by sport » Tue Nov 26, 2013 3:51 pm

With all due respect to Mr. Slott, he is not a primary source. He may or may not be correct. sscritic has the right idea. Look in the government regulations to get first-hand info.
Jeff

kaneohe
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Re: Inheriting an inherited IRA

Post by kaneohe » Tue Nov 26, 2013 7:59 pm

Ed Slott is about as close to a primary source as you can be w/o being one. I think the discussion is about an unfortunate bit of
writing that is a bit ambiguous and perhaps a few extra words would have made things clearer as pointed out by f5s.

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Leesbro63
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Re: Inheriting an inherited IRA

Post by Leesbro63 » Tue Nov 26, 2013 8:02 pm

Just an amusing fact related to the 80 yr old marrying a 20 yr old who inherits: The last Civil War widow (who received a pension till she died) lasted until 2008, 123 years after the end of that war.

http://en.wikipedia.org/wiki/Maudie_Hopkins

Calm Man
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Re: Inheriting an inherited IRA

Post by Calm Man » Tue Nov 26, 2013 10:34 pm

Leesbro63 wrote:Just an amusing fact related to the 80 yr old marrying a 20 yr old who inherits: The last Civil War widow (who received a pension till she died) lasted until 2008, 123 years after the end of that war.

http://en.wikipedia.org/wiki/Maudie_Hopkins


I like this fact. It reminds me of another interesting fact which if it was analyzed a while ago, we might have altered the structure of social security. I cite the facts of the very first person to receive a social security check, Ida May Fuller of Vermont.

"The accumulated taxes on her salary during those three years was a total of $24.75. Her initial monthly check was $22.54. During her lifetime, she collected a total of $22,888 in Social Security benefits, paying in $24.75."

Not bad, a 1000 bagger.

sscritic
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Re: Inheriting an inherited IRA

Post by sscritic » Tue Nov 26, 2013 10:43 pm

26 CFR 1.408-2
(ii) Each such beneficiary (or beneficiary of a surviving spouse) may elect to treat the entire interest in the trust (or the remaining part of such interest if distribution thereof has commenced) as an account subject to the distribution requirements of section 408(a)(6) and paragraph (b)(6) of this section instead of those of section 408(a)(7) and paragraph (b)(7) of this section. Such an election will be deemed to have been made if such beneficiary treats the account in accordance with the requirements of section 408(a)(6) and paragraph (b)(6) of this section. An election will be considered to have been made by such beneficiary if either of the following occurs: (A) any amounts in the account (including any amounts that have been rolled over, in accordance with the requirements of section 408(d)(3)(A)(i), into an individual retirement account, individual retirement annuity, or retirement bond for the benefit of such individual) have not been distributed within the appropriate time period required by section 408(a)(7) and paragraph (b)(7) of this section; or (B) any additional amounts are contributed to the account (or to the account, annuity, or bond to which the beneficiary has rolled such amounts over, as described in (1) above) which are subject, or deemed to be subject, to the distribution requirements of section 408(a)(6) and paragraph (b)(6) of this section.

(8) Definition of beneficiaries. The term “beneficiaries” on whose behalf an individual retirement account is established includes (except where the context indicates otherwise) the estate of the individual, dependents of the individual, and any person designated by the individual to share in the benefits of the account after the death of the individual.

The beneficiary of a beneficiary is not a beneficiary unless that beneficiary is the spouse. I think I stand with fire5soon, but my knees are still a little wobbly.

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LadyGeek
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Re: Inheriting an inherited IRA

Post by LadyGeek » Tue Nov 26, 2013 10:43 pm

This thread is now in the Personal Finance (Not Investing) forum (IRA).
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bsteiner
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Re: Inheriting an inherited IRA

Post by bsteiner » Tue Nov 26, 2013 11:13 pm

fire5soon wrote:
minesweep wrote:From Ed Slott's book titled "The Retirement Savings Time Bomb"

Distribution Rules When an IRA Beneficiary Dies
As soon as you inherit an IRA, you should immediately name a beneficiary. That person will be your beneficiary. It it’s a non-spouse, the maximum post-death stretch on the RMD’s will be based on your life expectancy, not your beneficiary’s. If your beneficiary is your spouse (your wife, say) she can roll the IRA to her own IRA and name her own beneficiaries, who would also follow these rules. For the most part, it will be the non-spouse beneficiary who gets the longest stretch IRA.

The general rule is that when a beneficiary dies during his or her payout term and there is still a balance remaining in the inherited IRA, the beneficiary’s beneficiary can complete the remaining term of the deceased’s life expectancy. A beneficiary’s beneficiary cannot tack on his or her own life expectancy to this, however
.
Mike


Assuming I'm reading the Ed Slott quote correctly here, I disagree with him. A spouse can not assume their deceased spouse's inherited IRA into their own. They can only claim it into an inherited IRA in their name as a subsequent beneficiary. A spouse can only assume a deceased spouse's IRA into their own if their deceased spouse is the original depositor.


I can vouch for Ed Slott. He and I have been on continuing education panels together, and I've been a contributor to and a technical advisor for his newsletter for many years. He does an excellent job getting information out to the general public on a complicated subject. However, he's not a lawyer, and his writing doesn't always have the precision of a lawyer. Also, he's writing for the general public, not for lawyers.

What he's trying to say is that if the spouse of the original IRA owner is a beneficiary, he/she can roll it over into his/her own IRA. Thereafter, the spouse is treated like any other IRA owner, with the right to name new beneficiaries, take distributions as an original IRA owner, and convert to a Roth.

Alternatively, the spouse can remain as a beneficiary (useful if the spouse is under 59 1/2 and wants to be able to take distributions without the 10% penalty). There are special rules if the spouse dies before the original IRA owner would have reached his/her required beginning date.

If someone other than the spouse is a beneficiary, the required distributions are not affected by the beneficiary's death.

Alan S.
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Re: Inheriting an inherited IRA

Post by Alan S. » Wed Nov 27, 2013 3:18 pm

jon-nyc wrote:Say I have an inherited IRA from a parent. Then at some point I die and my wife inherits the inherited IRA.

My understanding is her RMD schedule would be the one I was on, that it wouldn't 'reset' based on her life expectancy.

Can anyone confirm this is true or correct me if I'm wrong?


Shorter answer to your question - Yes, you are correct in your understanding. Your wife as a successor beneficiary will not be able to assume ownership and will continue your RMD schedule, and if she passes her own successor beneficiary will also continue your RMD schedule etc. If she does not name a successor beneficiary and if her estate is the default beneficiary in the IRA agreement, her estate would likewise be subject to your schedule, although the estate would probably either distribute the remainder to close the estate OR assign the IRA to the beneficiaries of the estate to close the estate.

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slow n steady
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Re: Inheriting an inherited IRA

Post by slow n steady » Wed Nov 27, 2013 10:40 pm

Calm Man wrote:I can only imagine how little the long-lasting results were considered or even foreseen when the rules were made. These stretches can last a hundred years or maybe even more if some 80 year old marries a 20 year old. The average person or even sophisticated cannot understand all of the differing rules and regulations with regular and then ROTH IRAs. Hopefully some sense prevails down the road although I am not optimistic.


If we are using this logic you could stretch an IRA into forever. Fully fund a Roth IRA for many years and marry a much younger spouse. When you die the spouse will transfer it into his/her Roth IRA and then will wait many years and remarry to a much younger spouse. Rinse and repeat.

letsgobobby
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Re: Inheriting an inherited IRA

Post by letsgobobby » Fri Oct 06, 2017 6:56 pm

In summary then, the schedule dictating the withdrawals of a non-spousal beneficiary of an inherited IRA stands no matter what happens to that original beneficiary thereafter (or who he assigns as his beneficiaries)?

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Re: Inheriting an inherited IRA

Post by LadyGeek » Fri Oct 06, 2017 7:26 pm

I believe so, but I'm not an expert. However, I can refer you to the wiki: Inheriting an IRA

Just in case, note that an inherited Roth IRA has different rules: Inheriting a Roth IRA

(FYI - The thread is from 2013. Bumping an old thread with relevant information is fine.)
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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