Spouse/Widow Inheriting My IRA

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
patrickscott
Posts: 51
Joined: Thu Feb 01, 2018 8:53 am

Spouse/Widow Inheriting My IRA

Post by patrickscott » Sun Sep 08, 2019 10:04 am

Greetings,

Please disregard the term STRETCH in my posts and in the Subject line. :oops:

I am trying to write, for my wife, a basic, simple ‘Your Options When You Inherit My Stretch Traditional IRA,’ or, even better, ‘When You Inherit My Stretch Traditional IRA, Follow These Steps.’ I have found partial information here and there but nothing that succinctly and clearly states what her inherited, Stretch IRA options are after my death (under current tax laws - who knows what the future holds).

My wife is not interested in financial matters. She is not even interested in options; she just wants me to provide her with, if all possible, just one simple solution.

Your assistance, insight, suggestions, etc., are greatly appreciated.

Background Information:
She is my Primary beneficiary, our grown children Secondary.
She is under age 59 ½, not currently employed.
I am currently receiving my stretch RMD (my wife is more than 10 years my junior).
Current IRS life expectancy factor is 36.6.
She will not need any of my IRA funds at the time of my death, nevertheless, she will like, if possible, if without any penalties, to keep on receiving the about $11,000 yearly amount of my RMD.
To clarify, If there any penalties involved, she can easily wait until age 59 ½ or later to start receiving funds from my Traditional IRA.
She has her own modest Roth IRA and an even smaller Traditional IRA.
We live modestly, we have no debts, etc., and have other funds for living expenses and emergencies.
We have started converting as much as we can from IRA to Roth, but this is having little effect on the RMD.
We live in Texas. There is no estate that will have to go through probate. Everything is at Vanguard (with designated beneficiaries) and at Treasury (I Bonds with designated beneficiaries).

___________

The more I read, the more confused I am... These are the options I have found:

1) Roll-Over

2) Re-title

Best Option: Instead of a Roll Over into her own IRA account, wouldn’t her best and simplest option be to re-title the account at Vanguard, e.g., Patrick Scott’s IRA, Inherited for the benefit of Mary Scott?

Would this not allow her to keep on receiving the taxable RMD while under age 59 ½ AND after age 59 ½, for the next 36.6 years?

Could she take out, taxable yet penalty free, more that the RMD while under ag e59 ½ from the re-title the account?

As stated, any insight, suggestions, assistance, etc., are greatly appreciated.
Last edited by patrickscott on Tue Sep 10, 2019 3:23 pm, edited 6 times in total.

Silk McCue
Posts: 2875
Joined: Thu Feb 25, 2016 7:11 pm

Re: Spouse/Widow Inheriting My Stretch IRA

Post by Silk McCue » Sun Sep 08, 2019 2:53 pm

Please read and reread the Bogleheads Wiki until you understand the options available. It exists for the very purpose of education and answering questions such as this.

https://www.bogleheads.org/wiki/Inheriting_an_IRA

Cheers

Topic Author
patrickscott
Posts: 51
Joined: Thu Feb 01, 2018 8:53 am

Re: Spouse/Widow Inheriting My Stretch IRA

Post by patrickscott » Sun Sep 08, 2019 10:11 pm

Silk McCue wrote:
Sun Sep 08, 2019 2:53 pm
Please read and reread the Bogleheads Wiki until you understand the options available. It exists for the very purpose of education and answering questions such as this.

https://www.bogleheads.org/wiki/Inheriting_an_IRA

Cheers
Greetings,

Thanks for your suggestion. I had, of course, read the bogleheads wiki & forum and many other web sources before posting my questions. I have found that often, even though I think I have a firm grasp of a particular concept, that if I post my understanding, others will point out aspects that I had not thought of. In my particular case, I had not found any posting that, to my understanding related directly to a widow (not children) inheriting a stretch IRA (from a husband already receiving RMD) while she is still under age 59 1/2.

Thanks again.

bsteiner
Posts: 4265
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Spouse/Widow Inheriting My Stretch IRA

Post by bsteiner » Sun Sep 08, 2019 10:16 pm

Without more facts there's no way to know what option is best as of now. In addition, the facts may change between now and your death. If she survives you, she should consult with competent tax/estates counsel who can recommend what's best at that time.

Small Savanna
Posts: 94
Joined: Sat Feb 09, 2019 2:27 am

Re: Spouse/Widow Inheriting My Stretch IRA

Post by Small Savanna » Sun Sep 08, 2019 11:20 pm

I took a look at the Wiki, and this seems to be the most relevant paragraph:

"A spouse, however, might decide to forgo a spousal rollover if he/she is under the age of 59 and 1/2 and has a clear need for the income from the IRA. As beneficiary, the surviving spouse is required to take minumum distributions from the account. Withdrawals would be exempt from the 10% early withdrawal penalty tax."

So for example, if you die when your wife is 53, and she wants to continue taking withdrawals while avoiding the 10% penalty, this would be the best option. If she is already 59.5 when you die, or doesn't need the money right away, then the spousal rollover would be better.

Silk McCue
Posts: 2875
Joined: Thu Feb 25, 2016 7:11 pm

Re: Spouse/Widow Inheriting My Stretch IRA

Post by Silk McCue » Mon Sep 09, 2019 6:36 am

patrickscott wrote:
Sun Sep 08, 2019 10:11 pm
Silk McCue wrote:
Sun Sep 08, 2019 2:53 pm
Please read and reread the Bogleheads Wiki until you understand the options available. It exists for the very purpose of education and answering questions such as this.

https://www.bogleheads.org/wiki/Inheriting_an_IRA

Cheers
Greetings,

Thanks for your suggestion. I had, of course, read the bogleheads wiki & forum and many other web sources before posting my questions. I have found that often, even though I think I have a firm grasp of a particular concept, that if I post my understanding, others will point out aspects that I had not thought of. In my particular case, I had not found any posting that, to my understanding related directly to a widow (not children) inheriting a stretch IRA (from a husband already receiving RMD) while she is still under age 59 1/2.

Thanks again.
So sorry. Most folks have never read the Wiki's that ask questions here for which the answers have already been provided in the Wiki. Since you didn't specifically state that the Wiki did not yield the answer I reviewed it and found that it addressed your primary question, the answer for which Small Savanna provided in the quoted section above in their post. Since your question was rather long I thought a "read and reread" of the Wiki would provide you with the most authoritative and reliable source so that you could have full confidence in the answer(s) you were seeking.

It's great that you are doing this upfront planning to make it easier once you pass (hopefully far down the road).

Cheers

retiringwhen
Posts: 1293
Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: Spouse/Widow Inheriting My Stretch IRA

Post by retiringwhen » Mon Sep 09, 2019 5:45 pm

afaik, the only possible option for an heir inheriting a Beneficiary (aka Inherited) IRA is to re-title it and continue RMDs based on the original beneficiary's RMD schedule. Of course she can accelerate distributions above the rate of the RMD amount up to and including a full distribution.

BTW, I would not use the term "Stretch IRA" as it has no official meaning. I believe the only proper/legal name is a Beneficiary IRA. You are the current Beneficiary, your wife would be the Successor Beneficiary.

This article summarizes my understanding of how they work: https://www.irahelp.com/slottreport/inh ... erited-ira


Edit, I made an assumption that was not correct. It is NOT an inherited IRA. See OP's clarification below.
Last edited by retiringwhen on Tue Sep 10, 2019 8:54 am, edited 3 times in total.

Silk McCue
Posts: 2875
Joined: Thu Feb 25, 2016 7:11 pm

Re: Spouse/Widow Inheriting My Stretch IRA

Post by Silk McCue » Mon Sep 09, 2019 5:52 pm

retiringwhen wrote:
Mon Sep 09, 2019 5:45 pm
afaik, the only possible option for an heir inheriting a Beneficiary (aka Inherited) IRA is to re-title it and continue RMDs on the original beneficiary's RMD schedule. Of course she can accelerate distributions above the rate of the RMD amount up to and including a full distribution.
That is incorrect.

In regards to the OPs question this in regards to a younger spouse inheriting the IRA. She will have options as noted previously in this thread. I suggest you review the Wiki linked previously and the quoted section in Small Savanna’s posted response above.

Cheers.

retiringwhen
Posts: 1293
Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: Spouse/Widow Inheriting My Stretch IRA

Post by retiringwhen » Mon Sep 09, 2019 6:00 pm

Silk McCue wrote:
Mon Sep 09, 2019 5:52 pm
retiringwhen wrote:
Mon Sep 09, 2019 5:45 pm
afaik, the only possible option for an heir inheriting a Beneficiary (aka Inherited) IRA is to re-title it and continue RMDs on the original beneficiary's RMD schedule. Of course she can accelerate distributions above the rate of the RMD amount up to and including a full distribution.
That is incorrect.

In regards to the OPs question this in regards to a younger spouse inheriting the IRA. She will have options as noted previously in this thread. I suggest you review the Wiki linked previously and the quoted section in Small Savanna’s posted response above.

Cheers.
See my edit above, my read is the OP has already inherited an IRA calling it a "Stretch IRA" and he is already taking regular RMD's as per the requirements. If I am wrong and he just is over over 70.5 and taking RMD's from an IRA titled in his name, then, yes your comment is correct.

Silk McCue
Posts: 2875
Joined: Thu Feb 25, 2016 7:11 pm

Re: Spouse/Widow Inheriting My Stretch IRA

Post by Silk McCue » Mon Sep 09, 2019 6:09 pm

retiringwhen wrote:
Mon Sep 09, 2019 6:00 pm
See my edit above, my read is the OP has already inherited an IRA calling it a "Stretch IRA" and he is already taking regular RMD's as per the requirements. If I am wrong and he just is over over 70.5 and taking RMD's from an IRA titled in his name, then, yes your comment is correct.
You may very well be right. The original post could have used more clarity.

Cheers

Topic Author
patrickscott
Posts: 51
Joined: Thu Feb 01, 2018 8:53 am

Re: Spouse/Widow Inheriting My Stretch IRA

Post by patrickscott » Tue Sep 10, 2019 8:26 am

Greetings,

Thanks to all that posted. The more posts, the more I learn.

-------------------

Since my original post may not have been clear enough, here is some additional information:

1) I did not inherit the IRA.

2) It is my IRA and I started receiving it a few years ago.

3) Due to my wife's age, we were able to do a Stretch IRA.

3) My wife is not yet 59 1/2.

4) She would prefer continue receiving my IRA monthly payment/distribution.

Please let me know if you have any additional questions or need any additional clarifications.

Dottie57
Posts: 6721
Joined: Thu May 19, 2016 5:43 pm

Re: Spouse/Widow Inheriting My Stretch IRA

Post by Dottie57 » Tue Sep 10, 2019 8:36 am

Hi Op,

I would stop using the term “stretch IRA” since the following is the common definition of the term at Investopedia:

https://www.investopedia.com/terms/s/stretch-ira.asp

It is great you are thinking of your wife’s future.

Topic Author
patrickscott
Posts: 51
Joined: Thu Feb 01, 2018 8:53 am

Re: Spouse/Widow Inheriting My Stretch IRA

Post by patrickscott » Tue Sep 10, 2019 8:43 am

Small Savanna wrote:
Sun Sep 08, 2019 11:20 pm
I took a look at the Wiki, and this seems to be the most relevant paragraph:

"A spouse, however, might decide to forgo a spousal rollover if he/she is under the age of 59 and 1/2 and has a clear need for the income from the IRA. As beneficiary, the surviving spouse is required to take minimum distributions from the account. Withdrawals would be exempt from the 10% early withdrawal penalty tax."

So for example, if you die when your wife is 53, and she wants to continue taking withdrawals while avoiding the 10% penalty, this would be the best option. If she is already 59.5 when you die, or doesn't need the money right away, then the spousal rollover would be better.
Thanks for that clarification! :happy

If I understand you correctly, when I die, if my spouse is under age 59 1/2 and wished to continue receiving the minimum distribution, she can re-title the account and keep on receiving, penalty free, the taxable minimum distribution. (The fact that it is a Stretch IRA has no bearing on the options available to her.)

Thanks again!

Topic Author
patrickscott
Posts: 51
Joined: Thu Feb 01, 2018 8:53 am

Re: Spouse/Widow Inheriting My Stretch IRA

Post by patrickscott » Tue Sep 10, 2019 8:52 am

retiringwhen wrote:
Mon Sep 09, 2019 5:45 pm
afaik, the only possible option for an heir inheriting a Beneficiary (aka Inherited) IRA is to re-title it and continue RMDs based on the original beneficiary's RMD schedule. Of course she can accelerate distributions above the rate of the RMD amount up to and including a full distribution.

BTW, I would not use the term "Stretch IRA" as it has no official meaning. I believe the only proper/legal name is a Beneficiary IRA. You are the current Beneficiary, your wife would be the Successor Beneficiary.

This article summarizes my understanding of how they work: https://www.irahelp.com/slottreport/inh ... erited-ira

Edit, I made an assumption that may not be correct. Did you inherit the IRA in question or is it titled in your name? If it is inherited, my comment applies, if not, I will strike this comment.
Thanks for the additional information.

The IRA is NOT inherited by me, it is my IRA, titled in my name with my wife as a Beneficiary.

I used the term Stretch IRA just to be certain that the 'Stretch' has no effect on my spouse's options. It is now clear to me that a 'Stretch IRA' is no different that a regular IRA.

Thanks again.

Topic Author
patrickscott
Posts: 51
Joined: Thu Feb 01, 2018 8:53 am

Re: Spouse/Widow Inheriting My Stretch IRA

Post by patrickscott » Tue Sep 10, 2019 9:02 am

Dottie57 wrote:
Tue Sep 10, 2019 8:36 am
Hi Op,

I would stop using the term “stretch IRA” since the following is the common definition of the term at Investopedia:

https://www.investopedia.com/terms/s/stretch-ira.asp

It is great you are thinking of your wife’s future.
Thanks for the link and the suggestion to stop using 'Stretch' IRA. :happy

The older I get the more I think of her and our grown children's future... :happy

Silk McCue
Posts: 2875
Joined: Thu Feb 25, 2016 7:11 pm

Re: Spouse/Widow Inheriting My Stretch IRA

Post by Silk McCue » Tue Sep 10, 2019 9:09 am

patrickscott wrote:
Tue Sep 10, 2019 8:52 am

Thanks for the additional information.

The IRA is NOT inherited by me, it is my IRA, titled in my name with my wife as a Beneficiary.

I used the term Stretch IRA just to be certain that the 'Stretch' has no effect on my spouse's options. It is now clear to me that a 'Stretch IRA' is no different that a regular IRA.

Thanks again.
To be clear. If you did not inherit the IRA from someone else it is inappropriate to refer to it as a Stretch IRA because it isn’t. That term is used for non spousal inherited IRAs to distinguish between a 5 year distribution option and the option to stretch payments out over life expectancy.

Cheers

cherijoh
Posts: 6274
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Spouse/Widow Inheriting My Stretch IRA

Post by cherijoh » Tue Sep 10, 2019 9:44 am

patrickscott wrote:
Tue Sep 10, 2019 8:43 am
Small Savanna wrote:
Sun Sep 08, 2019 11:20 pm
I took a look at the Wiki, and this seems to be the most relevant paragraph:

"A spouse, however, might decide to forgo a spousal rollover if he/she is under the age of 59 and 1/2 and has a clear need for the income from the IRA. As beneficiary, the surviving spouse is required to take minimum distributions from the account. Withdrawals would be exempt from the 10% early withdrawal penalty tax."

So for example, if you die when your wife is 53, and she wants to continue taking withdrawals while avoiding the 10% penalty, this would be the best option. If she is already 59.5 when you die, or doesn't need the money right away, then the spousal rollover would be better.
Thanks for that clarification! :happy

If I understand you correctly, when I die, if my spouse is under age 59 1/2 and wished to continue receiving the minimum distribution, she can re-title the account and keep on receiving, penalty free, the taxable minimum distribution. (The fact that it is a Stretch IRA has no bearing on the options available to her.)

Thanks again!
How did you get that out of the quoted passage? :confused

If the IRA is "retitled" then it is her IRA. If the spouse is under 59.5, then she would need to inherit it to take penalty-free distributions before 59.5.

Topic Author
patrickscott
Posts: 51
Joined: Thu Feb 01, 2018 8:53 am

Re: Spouse/Widow Inheriting My Stretch IRA

Post by patrickscott » Tue Sep 10, 2019 2:42 pm

Silk McCue wrote:
Tue Sep 10, 2019 9:09 am
patrickscott wrote:
Tue Sep 10, 2019 8:52 am

Thanks for the additional information.

The IRA is NOT inherited by me, it is my IRA, titled in my name with my wife as a Beneficiary.

I used the term Stretch IRA just to be certain that the 'Stretch' has no effect on my spouse's options. It is now clear to me that a 'Stretch IRA' is no different that a regular IRA.

Thanks again.
To be clear. If you did not inherit the IRA from someone else it is inappropriate to refer to it as a Stretch IRA because it isn’t. That term is used for non spousal inherited IRAs to distinguish between a 5 year distribution option and the option to stretch payments out over life expectancy.

Cheers
Thanks. (I have been using the wrong terminology all along, :oops: :oops: :oops: thinking that if I could use the Joint Life and Last Survivor Expectancy Table, I was stretching :( the IRA payout.)
Last edited by patrickscott on Tue Sep 10, 2019 3:16 pm, edited 1 time in total.

retiringwhen
Posts: 1293
Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: Spouse/Widow Inheriting My Stretch IRA

Post by retiringwhen » Tue Sep 10, 2019 3:00 pm

patrickscott wrote:
Tue Sep 10, 2019 2:42 pm
Thanks. (I have been using the wrong terminology all along, :oops: :oops: :oops: thinking that if I could use the Joint Life and Last Survivor Expectancy Table, I was stretching :( the IRA payout.)
It was convoluted, but you got your answer :-) It is amazing how wrapped around a person can get with language and it can camouflage what they really need to know. Forums can be both good and bad for resolving those issues.

Topic Author
patrickscott
Posts: 51
Joined: Thu Feb 01, 2018 8:53 am

Re: Spouse/Widow Inheriting My Stretch IRA

Post by patrickscott » Tue Sep 10, 2019 3:10 pm

retiringwhen wrote:
Tue Sep 10, 2019 3:00 pm
patrickscott wrote:
Tue Sep 10, 2019 2:42 pm
Thanks. (I have been using the wrong terminology all along, :oops: :oops: :oops: thinking that if I could use the Joint Life and Last Survivor Expectancy Table, I was stretching :( the IRA payout.)
It was convoluted, but you got your answer :-) It is amazing how wrapped around a person can get with language and it can camouflage what they really need to know. Forums can be both good and bad for resolving those issues.
Thanks to all for your patience and clarifications! :sharebeer :sharebeer

Alan S.
Posts: 8569
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Spouse/Widow Inheriting My IRA

Post by Alan S. » Tue Sep 10, 2019 3:53 pm

First of all, in the year that you pass, the RMD for that year remains what you calculated. If you did not complete that RMD before passing, your wife will have to distribute the balance of your RMD before the end of that year. Her own beneficiary RMDs do not begin until the following year if she does not elect ownership. To avoid her having to worry about the year of death RMD, you might start to take your Table II RMD early in the year if your health begins to decline.

With respect to your effort to develop a simple RMD calculation for her after your death using a dollar amount, that will not work. She should re title the account as an inherited IRA if she inherits before she reaches 59.5 as that will allow her to avoid the 10% penalty for any distributions taken prior to 59.5. Then, once she reaches 59.5 she should advise the IRA custodian that she is electing to become the owner of that IRA. The custodian will then transfer that IRA into a new IRA account as the owner. Her own RMDs as the owner will not start until she is 70.5. Obviously, if she has reached 59.5 before you pass, she should immediately elect to assume ownership. She will then be able to take out what she needs with no penalty and there are no RMDs for her until she reaches 70.5. However, she still needs to be sure to complete the year of death RMD as mentioned above.

If she inherits will still younger than 59.5, her RMDs will be calculated using her own age at the end of the year following the year of your death. She will use Table I and will have to enter the table each year she remains as beneficiary. The 1.0 reduction each year DOES NOT apply to her because she is a sole surviving spouse beneficiary. But there is no way to avoid having to get a new divisor from the table each year. In the year she reaches 59.5 and elects ownership of the inherited IRA, there is NO beneficiary RMD because she will be treated as the owner that entire year. There also is no owner RMD unless she has reached 70.5.

User avatar
BL
Posts: 9106
Joined: Sun Mar 01, 2009 2:28 pm

Re: Spouse/Widow Inheriting My IRA

Post by BL » Tue Sep 10, 2019 4:10 pm

from random Google search- regarding titling of inherited IRA:
Answer: The titling of an inherited IRA can vary from one IRA custodian to another. The deceased IRA owner's name must remain on the inherited IRA account title and the account title must indicate that it is an inherited IRA by using the word “beneficiary” or “beneficiary IRA” or “inherited IRA.”
and Kitces summary:
Yet while the additional flexibility of the spousal stretch IRA and the spousal rollover option are both more favorable than the standard rules for non-spousal beneficiaries of inherited retirement accounts, the special choices that spouses face have unique trade-offs. On the one hand, leaving an inherited IRA as such for a spousal beneficiary obligates him/her to take post-death Required Minimum Distributions (RMDs) – potentially sooner rather than later – but avoids the impact of an early withdrawal penalty. A spousal rollover allows for the use of more favorable RMD tables, and may defer the onset of RMDs until even later, while also providing more favorable treatment for subsequent beneficiaries… but re-introduces the 10% early withdrawal penalty, which may be problematic for younger spousal beneficiaries (under age 59 ½).

Ultimately, the good news is that spousal beneficiaries have the option to make either choice, and even have flexibility about the timing – allowing a decision to maintain an inherited stretch IRA for the spouse initially, and completing a spousal rollover later (after he/she turns age 59 ½). Nonetheless, it’s important to carefully consider the choices and trade-offs… especially since a spousal rollover, once completed, is irrevocable and cannot be undone after the fact!
It appears that one can delay completing the rollover to one's own IRA so that doing it after age 59 1/2 can be done and gives more flexibility to both the survivor and her heirs.

Alan S.
Posts: 8569
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Spouse/Widow Inheriting My IRA

Post by Alan S. » Tue Sep 10, 2019 9:01 pm

Remember that the default rules for sole spousal beneficiary inherited IRAs provides that if the spouse fails to take a beneficiary RMD once required, they default to ownership of the IRA regardless of whether the title has been changed to that of an owner.

This has actually helped to preserve the stretch for eventual non spouse beneficiaries named by the surviving spouse. If the surviving spouse is taking beneficiary RMDs as required, but then passes, the non spouse (often a child) beneficiary becomes a successor beneficiary and does not get a new stretch. However, if the surviving spouse fails to take their beneficiary RMD and default to ownership their beneficiary inherits from an owner and will get their own stretch. Accordingly, the first thing for a non spousal beneficiary who thinks they are only a successor is to check to see if all beneficiary RMDs were completed by the surviving spouse, and if they find even a dollar of RMD shortage, they will get their stretch.

Topic Author
patrickscott
Posts: 51
Joined: Thu Feb 01, 2018 8:53 am

Re: Spouse/Widow Inheriting My IRA

Post by patrickscott » Fri Sep 13, 2019 9:05 am

Alan S. wrote:
Tue Sep 10, 2019 3:53 pm
First of all, in the year that you pass, the RMD for that year remains what you calculated. If you did not complete that RMD before passing, your wife will have to distribute the balance of your RMD before the end of that year. Her own beneficiary RMDs do not begin until the following year if she does not elect ownership. To avoid her having to worry about the year of death RMD, you might start to take your Table II RMD early in the year if your health begins to decline.

With respect to your effort to develop a simple RMD calculation for her after your death using a dollar amount, that will not work. She should re title the account as an inherited IRA if she inherits before she reaches 59.5 as that will allow her to avoid the 10% penalty for any distributions taken prior to 59.5. Then, once she reaches 59.5 she should advise the IRA custodian that she is electing to become the owner of that IRA. The custodian will then transfer that IRA into a new IRA account as the owner. Her own RMDs as the owner will not start until she is 70.5. Obviously, if she has reached 59.5 before you pass, she should immediately elect to assume ownership. She will then be able to take out what she needs with no penalty and there are no RMDs for her until she reaches 70.5. However, she still needs to be sure to complete the year of death RMD as mentioned above.

If she inherits will still younger than 59.5, her RMDs will be calculated using her own age at the end of the year following the year of your death. She will use Table I and will have to enter the table each year she remains as beneficiary. The 1.0 reduction each year DOES NOT apply to her because she is a sole surviving spouse beneficiary. But there is no way to avoid having to get a new divisor from the table each year. In the year she reaches 59.5 and elects ownership of the inherited IRA, there is NO beneficiary RMD because she will be treated as the owner that entire year. There also is no owner RMD unless she has reached 70.5.
Thanks for your detailed reply.

To clarify: I am (and have been for the last two years) receiving RMD based on the Joint Life Expectancy Table, Table II.

To summarize, to be certain I fully understand your reply:

----Assuming my wife decides to continue receiving RMD's from my account while under age 59.5----

1) In the year of my death, my wife will withdraw my RMD amount as calculated as if I were still alive. (Hopefully that will not be necessary since I always take my RMD by very early January of each year... and since I don't plan on dying in January. :happy )

2) My wife will, if she inherits before age 59.5, "re title the account as an inherited IRA."

3) Her re titled beneficiary inherited IRA distribution/withdrawal will not start until the year after my death.

4) The amount she is required to withdraw from her re titled beneficiary inherited IRA account, while she is under age 59.5, "will be calculated using her own age at the end of the year following the year of [my] death. She will use Table I." Thanks for that clarification!

So, for example, if she is 57 when I die, her re titled inherited beneficiary IRA RMD will be computed using Table I based on her age "at at the end of the year following the year of [my] death;" thus, based on age 58, her life expectancy will be 27.0 (based on chart found on the web) for the RMD calculations.

5) Her life expectancy will have to be recalculated each year to determine the correct RMD.

6) Once my spouse reaches age 59.5 (or if she is age 59.5 or older at the time of my death) she will contact the IRA account custodian and elect to become the owner of that IRA.

7) Once the account is in her name, after age 59.5, she can (a) continue receiving distributions (in any amount she wishes) or (b) stop receiving distributions since RMD's --for an IRA account only in her name-- are only required at age 70.5.

Thanks again!
Last edited by patrickscott on Fri Sep 13, 2019 12:10 pm, edited 2 times in total.

cherijoh
Posts: 6274
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Spouse/Widow Inheriting My IRA

Post by cherijoh » Fri Sep 13, 2019 9:15 am

Alan S. wrote:
Tue Sep 10, 2019 3:53 pm
First of all, in the year that you pass, the RMD for that year remains what you calculated. If you did not complete that RMD before passing, your wife will have to distribute the balance of your RMD before the end of that year. Her own beneficiary RMDs do not begin until the following year if she does not elect ownership. To avoid her having to worry about the year of death RMD, you might start to take your Table II RMD early in the year if your health begins to decline.

With respect to your effort to develop a simple RMD calculation for her after your death using a dollar amount, that will not work. She should re title the account as an inherited IRA if she inherits before she reaches 59.5 as that will allow her to avoid the 10% penalty for any distributions taken prior to 59.5. Then, once she reaches 59.5 she should advise the IRA custodian that she is electing to become the owner of that IRA. The custodian will then transfer that IRA into a new IRA account as the owner. Her own RMDs as the owner will not start until she is 70.5. Obviously, if she has reached 59.5 before you pass, she should immediately elect to assume ownership. She will then be able to take out what she needs with no penalty and there are no RMDs for her until she reaches 70.5. However, she still needs to be sure to complete the year of death RMD as mentioned above.

If she inherits will still younger than 59.5, her RMDs will be calculated using her own age at the end of the year following the year of your death. She will use Table I and will have to enter the table each year she remains as beneficiary. The 1.0 reduction each year DOES NOT apply to her because she is a sole surviving spouse beneficiary. But there is no way to avoid having to get a new divisor from the table each year. In the year she reaches 59.5 and elects ownership of the inherited IRA, there is NO beneficiary RMD because she will be treated as the owner that entire year. There also is no owner RMD unless she has reached 70.5.
Wow! You learn something new everyday. I didn't realize that a spouse could elect to inherit the IRA and then switch it over to ownership at a later date.

How does this affect her beneficiaries after she passes? IIRC the beneficiaries of an already inherited IRA have to use the 5-yr rule and can't stretch their "second generation" inherited IRA. If the OP's spouse lives long enough to take ownership of the IRA, do her benificiaries have the option to strech it? In other words, is it as though she never inherited the IRA in the first place?

Never mind, I see you answered my question in a subsequent post!

Topic Author
patrickscott
Posts: 51
Joined: Thu Feb 01, 2018 8:53 am

Re: Spouse/Widow Inheriting My IRA

Post by patrickscott » Fri Sep 13, 2019 9:31 am

BL wrote:
Tue Sep 10, 2019 4:10 pm
from random Google search- regarding titling of inherited IRA:
Answer: The titling of an inherited IRA can vary from one IRA custodian to another. The deceased IRA owner's name must remain on the inherited IRA account title and the account title must indicate that it is an inherited IRA by using the word “beneficiary” or “beneficiary IRA” or “inherited IRA.”
---- Thanks for that information. I will print it for my wife's records.

and Kitces summary:
Yet while the additional flexibility of the spousal stretch IRA and the spousal rollover option are both more favorable than the standard rules for non-spousal beneficiaries of inherited retirement accounts, the special choices that spouses face have unique trade-offs. On the one hand, leaving an inherited IRA as such for a spousal beneficiary obligates him/her to take post-death Required Minimum Distributions (RMDs) – potentially sooner rather than later – but avoids the impact of an early withdrawal penalty. A spousal rollover allows for the use of more favorable RMD tables, and may defer the onset of RMDs until even later, while also providing more favorable treatment for subsequent beneficiaries… but re-introduces the 10% early withdrawal penalty, which may be problematic for younger spousal beneficiaries (under age 59 ½).

Ultimately, the good news is that spousal beneficiaries have the option to make either choice, and even have flexibility about the timing – allowing a decision to maintain an inherited stretch IRA for the spouse initially, and completing a spousal rollover later (after he/she turns age 59 ½). Nonetheless, it’s important to carefully consider the choices and trade-offs… especially since a spousal rollover, once completed, is irrevocable and cannot be undone after the fact!
It appears that one can delay completing the rollover to one's own IRA so that doing it after age 59 1/2 can be done and gives more flexibility to both the survivor and her heirs.
Thanks. I will have to take a look at Kitces.

Topic Author
patrickscott
Posts: 51
Joined: Thu Feb 01, 2018 8:53 am

Re: Spouse/Widow Inheriting My IRA

Post by patrickscott » Sun Sep 15, 2019 5:56 am

Alan S. wrote:
Tue Sep 10, 2019 3:53 pm

With respect to your effort to develop a simple RMD calculation for her after your death using a dollar amount, that will not work.

If she inherits will still younger than 59.5, her RMDs will be calculated using her own age at the end of the year following the year of your death. She will use Table I and will have to enter the table each year she remains as beneficiary. The 1.0 reduction each year DOES NOT apply to her because she is a sole surviving spouse beneficiary. But there is no way to avoid having to get a new divisor from the table each year. In the year she reaches 59.5 and elects ownership of the inherited IRA, there is NO beneficiary RMD because she will be treated as the owner that entire year. There also is no owner RMD unless she has reached 70.5.
THANKS AGAIN Alan, :beer :beer :beer , for pointing out that if my spouse inherits before are 59.5, she will have to do yearly recalculations, something she is not interested in doing.

Since my wife is interested in the simplest possible solution and since she can comfortably survive financially until age 59.5 (and longer), she has decided that her best option is to roll over my/the inherited IRA assets into her own IRA .

Thanks again Alan and all that have assisted in clarifying this matter.

Post Reply