I need a clarification on an MRD issue I have recently encountered:

Husband and wife are both over 70 1/2. Distributions have been taken using Joint Life Expectancy with recalculation. The husband dies, and the wife elects to treat the IRA as her own.

Question: Can she elect new beneficiaries and set up a new payment scheme? Everything I have read (both in books and here on the message boards) seem to indicate that this is allowable. However, one of the largest banks in the US indicated that the distributions must continue "as least as rapidly" as they were before, thus having the wife continue the distributions on a Single life expenctancy, as the husbands expectancy dropped to zero in the year after death.

Who is right? Any cites on the boards or from the regs would be appreciated.

The "at least as rapidly rule" does not apply because that only applies to beneficiaries. If you look at sec 401(a)(9) you will see that the spouse is not defined as a "beneficiary". In addition, it is now HER IRA so that whatever happened when it was the husband's IRA is totally irrelevant.

She can and SHOULD name new beneficiaries and should start her distributions based upon the joint life subject to MDIB.

The preceding is based upon her rolling his IRA into a brand new IRA, not her existing one. If she rolled it into her existing one, all bets are off.

However, even in that case there was a PLR that permitted the spouse who made this mistake to correct it.

Thanks, Barry. That is what I thought the answer was. What threw me was that this bank was adamant that the "least as rapidly" rule applied to this situation. Guess it goes to show you trust your instincts!