Inherited Spousal IRA RMD

Sorry for your loss. There are two choices for IRAs inherited by spouses.

A) She transfers it to her name and treats it as her own. It can be mingled with her other IRA money, it's her IRA. In this case, her RMD begins when she turns 70-1/2.

B) She treats it as an inherited account, in which case her RMDs must start the year your step-dad would have turned 70-1/2. This is different than if a non-spouse inherited the IRA.

So - to answer this exactly, how old is Mom and how old would step-Dad have been now? How is the account held? I don't recognize "inherited spousal IRA" - what is the exact title of account?

Note - if it's A, there is the choice to convert to Roth IRA, partial or full amount after the year's RMD if any are taken. If Step-Dad were younger, B helps hold off initial RMDs. Absent any dates, I can tell you "because it was an inherited spousal IRA that there was no RMD" is not correct. They mis-spoke, you mis-heard, I don't know. Roth IRAs have no RMD, Traditional IRAs do. All inherited IRAs do.

Please clarify the question above and you'll get some more help here. And, I would ask the broker to respond in writing to your RMD question. Always good to have the paper trail, just in case. Joe

The direct answer is easy: She will be required to take mandatory distributions. As to when your mother must take them and how much must be taken will depend upon what happened after she inherited the IRA. Assuming she was the sole beneficiary, she had two choices. 1. Treat the IRA as if she was the owner or 2. Treat the IRA as a beneficiary.

Your use of the phrase "inherited spousal IRA" is somewhat confusing and I can't tell exactly what happened. There are 3 ways a surviving spouse can treat the inherited IRA as her own. A. Have the broker rename it. E.g., John Smith IRA gets renamed Jane Smith IRA. B. Have the broker roll it over into an IRA already owned by the surviving spouse. C. Leave the name as is (never a recommended approach) and actually treat the IRA as if she was the owner. E.g., make annual contributions or take distributions that are not beneficiary RMDs. If this is what happened, then your mother starts to take RMDs when she turns age 70 1/2.

If the above did not happen and the IRA is now named something like John Smith IRA f/b/o Jane Smith or Jane Smith IRA as Beneficiary of John Smith, then your mother does not have her own IRA. She has a beneficiary IRA. As such, mandatory distributions are required. As to when and how much will depend upon such variables as whether or not your stepfather had already reached his required beginning date (age 70 1/2) and whether the IRA specified which of two optional rules must be used to calculate RMDs or whether the beneficiary elects to empty the account within 5 years.

Therefore, please reply and tell us whether the IRA she inherited is a Beneficiary IRA or your mother is treating as her own IRA.

Alan - for a non-spouse beneficiary how does the deceased's age come into play? Aren't RMDs required from year 1 regardless?

A non-spouse beneficiary, even if under 59 years old, must take a minimum distribution based on his age, starting the year after the date of death, as I recall.

Agreed. I was curios why Alan was referencing the age of deceased. How that would make a difference. (Aside from his own RMD being due for year of passing)

See page 35 in Pub 590. It explains the RMD rules for the non-spouse beneficiary if the owner died before the RBD or died on or after the RBD.

Right. Now if mom were to retitle the account and treat it as her own, at 90 her divisor is 11.4 and instead of dropping by 1 each year, she gets to use the table and at 91 it's 10.8. She also has the option to convert to Roth. If you looked at her taxable income and determined that adding $1000 to it had her stay in the same bracket, some converting may be recommended. Joe

D - The OP was still a bit confused on the calculation, but the 'subtract one' for a beneficiary IRA is accurate. The table is consulted for the initial divisor, and that's it. I see your point, if the divisor happened to be a whole number, we get to 1 eventually and the prior 12/31 balance is taken out, but any gain since then is still in the account, when you hit divide by zero. So, the 70 yr old who has an initial divisor of 17 will hit that if he lives to 87, didn't withdraw all funds by then, and had some gain prior to the final RMD being taken.

The potential divide by zero in my opinion is to be ignored, the balance withdrawn. Game over.

...But as one subtracts 1 each year, one eventually hits zero.

...And if the initial divisor has a fraction (i.e. non-integral part), then in the last year of the expected life, one must computationally withdraw more than 100%. ;-)

If it were not for an exception that says if the IRAs have no more in them, pay it all out and you're done.

See Pub 590

Begin Quote:

Requirements. If your traditional IRA (or IRAs) inNondeductible IRAs includes assets other than your affected investment, all traditional IRA assets, including the available portion of your affected investment, must be used to satisfy as much as possible of your IRA distribution requirement. If the affected investment is the only asset in your IRA, as much the required distribution as possible must come from the available portion, if any, of your affected investment.

End Quote

Even had we not been discussing the "reduce the denominator by "1" each succeeding year" but had made a simple table lookup and found our IRAs had lost so much of their assets they contain less than the RMD amount, it is sufficient to pay them down to zero.

Ok you've given me alot info (which I don't know how to use), but I still don't know how much to withdraw. Here are the details. Value of account 12/31/09= 39657.25 Age at death on July 2008= 74 Can you tell me what the RMD should be? Thanks and happy holidays to all Phil

Retired wrote: : My stepfather died in 2008, and we setup his IRA to go to my mother as : an inherited spousal IRA. When I called the brokerage company where : this was done, to inquire about the RMD that had to be taken before : Dec 31 2010, I was told that because it was an inherited spousal IRA : that there was no RMD. She didn't take one in 2009 because of the : waver. Is it true that she will never be required to take an RMD from : this account? : Phil

I am no lawyer, but when my husband died in June his IRA passed to me as the designated beneficiary. When the financial institution tht holds these accounts(his and mine) trnsferred his holdings to my account they took out his RMD, which we usually take on the last of the year, and transferred it into my regular, non-IRA account. My RMD will be transferred sometime this week. The new RMD for next yer, I assume will all be based now on my life expectancy, no longer his, so will be lower as I am considerably younger.

Wendy Baker

The broker (Scott Trade) that originally told me that no RMD was needed, now tells me that they don't figure RMD's on inherited IRAs. That comes right from the department that handles such things. When I sent them the form to figure the RMD and transfer it, they never even bothered to let me know that it they weren't going to do it, I had to call them to find out. Now I'm scrambling around with less than a week to figure it out and it get done. Trust me, when this is over I'm transferring all of our accounts from SCOTTADE. Phil

Retired wrote: ...

As Alan noted earlier, ...

So, from the info given, it the 2010 RBD --> 39657.25/10.7 = 3706.29

I'd recommend going to the IRS web site and reading on Pub 590 to see how Alan got there. If you're still not comfortable, call a local professional for advice.

Retired wrote: : On Dec 24, 1:56?pm, "W. Baker" wrote: : > Retired wrote: : >

: > : My stepfather died in 2008, and we setup his IRA to go to my mother as : > : an inherited spousal IRA. When I called the brokerage company where : > : this was done, to inquire about the RMD that had to be taken before : > : Dec 31 2010, I was told that because it was an inherited spousal IRA : > : that there was no RMD. She didn't take one in 2009 because of the : > : waver. Is it true that she will never be required to take an RMD from : > : this account? : > : Phil : >

: > I am no lawyer, but when my husband died in June his IRA passed to me as : > the designated beneficiary. ?When the financial institution tht holds : > these accounts(his and mine) trnsferred his holdings to my account they : > took out his RMD, which we usually take on the last of the year, and : > transferred it into my regular, non-IRA account. ?My RMD will be : > transferred ?sometime this week. ?The new RMD for next yer, I assume will : > all be based now on my life expectancy, no longer his, so will be lower as : > I am considerably younger. ? : >

: > Wendy Baker

: The broker (Scott Trade) that originally told me that no RMD was : needed, now tells me that they don't figure RMD's on inherited IRAs. : That comes right from the department that handles such things. When I : sent them the form to figure the RMD and transfer it, they never even : bothered to let me know that it they weren't going to do it, I had to : call them to find out. Now I'm scrambling around with less than a week : to figure it out and it get done. Trust me, when this is over I'm : transferring all of our accounts from SCOTTADE. : Phil

: --

So you never got the information abou how much you would have to take out of each IRA for the year? That is just terrible. Fidelity always lets us know early in the year(once they have the Dec 31 values for each IRA how much is the RMD for the accounts. When my husband died This was the amount they transferred out of his IRA before transferring the rest to my, now combined IRA which has all the funds in one place, but labelled as my IRA and my inherited IRA. Try to get something like that once you get this all straightened out. The more you can have done like that, the easier it is for you. Sorry I can't give you the formula to figure your withdrawal.

Let me wish you a New Year that is far happier than this one has been.

Wendy Baker