RMD for 90 yr. old; Inherited tIRA from Spouse

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austin757
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RMD for 90 yr. old; Inherited tIRA from Spouse

Post by austin757 »

I'm helping someone who turned 90 a couple months ago calculate his RMD. His spouse passed away in December 2020. The account value at the end of 2020 was approximately $276,000.

He was the spousal beneficiary and had it transferred to him as a new individual tIRA. What would be his required RMD as a lump sum for 2021?
scifilover
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Re: RMD for 90 yr. old; Inherited tIRA from Spouse

Post by scifilover »

The divisor for age 90 for 2021 is 11.4....so $276k/11.4 = $24210.53
chemocean
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Re: RMD for 90 yr. old; Inherited tIRA from Spouse

Post by chemocean »

With the end-of-lie activities for the spouse occurring in 2020, He should also confirm that the spouse took their RMD in 2020. If not, he will need to take the 2020 RMD as beneficiary.
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austin757
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Re: RMD for 90 yr. old; Inherited tIRA from Spouse

Post by austin757 »

chemocean wrote: Wed Jun 09, 2021 9:30 am With the end-of-lie activities for the spouse occurring in 2020, He should also confirm that the spouse took their RMD in 2020. If not, he will need to take the 2020 RMD as beneficiary.
They took out the full RMD for 2020. I think his concern was any changes now that he is no longer married and taking an RMD. I used the divisor and came up with approximately $25k.
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dodecahedron
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Re: RMD for 90 yr. old; Inherited tIRA from Spouse

Post by dodecahedron »

If he has not already retitled the IRA into his own name, perhaps he should have it retitled as an inherited IRA. Then he would have 10 years from his spouse's death to distribute the IRA proceeds on any flexible schedule that makes sense, e.g., possibly waiting for a year with large medical expenses (e.g., LTC) to distribute significant sums.

It is worth remembering that a surviving spouse IRA beneficiary has all the same options that a regular beneficiary has PLUS the option of taking over the account as their own IRA. Correction: it is unclear whether this is always true. See Alan S. informed and authoritative post below.

Whether he maintains the IRA as an inherited IRA or takes it over as his own IRA, he does of course have the right to make QCDs from either type of account at any time.
Last edited by dodecahedron on Thu Jun 10, 2021 5:13 am, edited 1 time in total.
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austin757
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Re: RMD for 90 yr. old; Inherited tIRA from Spouse

Post by austin757 »

He retitled it in his own name so I don't think that change would be possible. He really doesn't need any of the RMD to live on. He just wants to take it as a lump sump just to not have to worry about it before later in the year.
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dodecahedron
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Re: RMD for 90 yr. old; Inherited tIRA from Spouse

Post by dodecahedron »

austin757 wrote: Wed Jun 09, 2021 10:31 am He retitled it in his own name so I don't think that change would be possible. He really doesn't need any of the RMD to live on. He just wants to take it as a lump sump just to not have to worry about it before later in the year.
If has already retitled it into his own name, I believe you are right that it is no longer possible to simply leave it as inherited IRA. In that case, simply taking the appropriately computed RMDs in accordance with his stated plans makes sense.
Alan S.
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Re: RMD for 90 yr. old; Inherited tIRA from Spouse

Post by Alan S. »

austin757 wrote: Wed Jun 09, 2021 7:04 am I'm helping someone who turned 90 a couple months ago calculate his RMD. His spouse passed away in December 2020. The account value at the end of 2020 was approximately $276,000.

He was the spousal beneficiary and had it transferred to him as a new individual tIRA. What would be his required RMD as a lump sum for 2021?
First, since spouse passed in 2020 when RMDs were waived, there is no year of death RMD to be concerned with.
The 2021 RMD divisor as the IRA owner is correct at 11.4. It is also correct that once a surviving spouse elects ownership, there is no possibility of reverting to an inherited IRA.

So what would have been the effect if the inherited IRA was maintained as inherited?
1) Surviving spouse would be eligible for the life expectancy stretch, but at age 90 the divisor would be 5.5, generating an RMD more than double the RMD as owner.
2) If deceased spouse was 73-76 the surviving spouse could have used the remaining LE of the decedent and beneficiary RMDs would start out lower than for an owner. If younger than 73, this rule is unavailable because death would have been prior to the RBD.
3) Recently revised Pub 590 B indicates that the surviving spouse was not able to elect the 10 year rule because owner passed after RBD, at least we assume that. This rule surprised some experts who assumed a surviving spouse would always have lower RMDs than other beneficiaries. Given IRS errors in the first Pub 590, it is not a sure thing that the 10 year rule would have been available or not, as the new Pub might also be wrong, but it's moot point once ownership has been elected.
Jablean
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Re: RMD for 90 yr. old; Inherited tIRA from Spouse

Post by Jablean »

austin757 wrote: Wed Jun 09, 2021 7:04 am I'm helping someone who turned 90 a couple months ago calculate his RMD. His spouse passed away in December 2020. The account value at the end of 2020 was approximately $276,000.

He was the spousal beneficiary and had it transferred to him as a new individual tIRA. What would be his required RMD as a lump sum for 2021?
The same divisor that he should already be using for his own tIRAs.
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dodecahedron
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Re: RMD for 90 yr. old; Inherited tIRA from Spouse

Post by dodecahedron »

Alan S. wrote: Wed Jun 09, 2021 7:19 pm
austin757 wrote: Wed Jun 09, 2021 7:04 am I'm helping someone who turned 90 a couple months ago calculate his RMD. His spouse passed away in December 2020. The account value at the end of 2020 was approximately $276,000.

He was the spousal beneficiary and had it transferred to him as a new individual tIRA. What would be his required RMD as a lump sum for 2021?
First, since spouse passed in 2020 when RMDs were waived, there is no year of death RMD to be concerned with.
The 2021 RMD divisor as the IRA owner is correct at 11.4. It is also correct that once a surviving spouse elects ownership, there is no possibility of reverting to an inherited IRA.

So what would have been the effect if the inherited IRA was maintained as inherited?
1) Surviving spouse would be eligible for the life expectancy stretch, but at age 90 the divisor would be 5.5, generating an RMD more than double the RMD as owner.
2) If deceased spouse was 73-76 the surviving spouse could have used the remaining LE of the decedent and beneficiary RMDs would start out lower than for an owner. If younger than 73, this rule is unavailable because death would have been prior to the RBD.
3) Recently revised Pub 590 B indicates that the surviving spouse was not able to elect the 10 year rule because owner passed after RBD, at least we assume that. This rule surprised some experts who assumed a surviving spouse would always have lower RMDs than other beneficiaries. Given IRS errors in the first Pub 590, it is not a sure thing that the 10 year rule would have been available or not, as the new Pub might also be wrong, but it's moot point once ownership has been elected.
Thanks for this comprehensive and informed commentary on a complex topic, which apparently confuses even the IRS folks who write the official Pubs designed to inform taxpayers.
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austin757
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Re: RMD for 90 yr. old; Inherited tIRA from Spouse

Post by austin757 »

Jablean wrote: Thu Jun 10, 2021 3:58 am
austin757 wrote: Wed Jun 09, 2021 7:04 am I'm helping someone who turned 90 a couple months ago calculate his RMD. His spouse passed away in December 2020. The account value at the end of 2020 was approximately $276,000.

He was the spousal beneficiary and had it transferred to him as a new individual tIRA. What would be his required RMD as a lump sum for 2021?
The same divisor that he should already be using for his own tIRAs.
He never had an IRA. It was only his spouse that invested in her own tIRA.
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Eagle33
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Re: RMD for 90 yr. old; Inherited tIRA from Spouse

Post by Eagle33 »

As usual, Alan S is correct. For those others whose situation may be different than OP, read Natalie Choate's article A Sneak Preview of Secure Act Regulations at Morningstar for a RMD summary.
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.
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