IRA's - Minimum Distributions

[eilano]

Husband and Wife have IRA accounts. Both are taking the reguired minimum distributions. Husband dies. What does Wife do with Husband's IRA. We know she can rollover the balance into her IRA but what happens to the minimum distributions that were being taken from the Husband's IRA. The PA Book says the deceased IRA's holder distributions must be at least as rapidly as they were before his death. However, what happens if the factor was being recalculated each year? And how is the amount calculated if the Husband's account is rolled over to the Wife's account? Does the minimum need to be made for the Husband's account in the year of his death?

[KJohnson]

You may want to look at the following:

http://www.benefitslink.com/cgi-bin/qa.cgi...a_distributions

The wife should not roll her husband's IRA into an existing IRA, but should roll it into a new separate IRA. (This avoids any issues regarding whether you could use separate accounting discussed in the link above).

Under the "inherited IRA" rules wife could then take wdistributions based on joint life expectancies with whatever beneficiaries she designates for the new IRA.

[BPickerCPA]

When an individual in required pay status dies during the year prior to taking that year's required distribution, the beneficiary should take the decedent's required distribution. This should be done prior to doing any rollover. Note that the distribution is the amount that the decedent should have taken, but it belongs to the named beneficiary, not the decedent's estate.

Barry

[Mary Kay Foss]

I agree with the answers provided by KJohnson and BPicker but I wanted to clarify a couple of points.

First, in the year of death the RMD is supposed to be claimed as if the decedent had not passed away. The custodian normally will not allow a rollover or transfer of the account without the year's RMD being distributed.

Also, the recalculation election goes by the wayside if the IRA owner dies and the spouse rolls over to a new IRA. The survivor makes his or her own elections as to beneficiaries and recalculation.

The problem with rolling it to an existing IRA owned by the spouse is that elections may have already been made (if the spouse is past the RBD) regarding beneficiaries and to recalc or not.

[Mary Kay Foss]

I agree with answers from KJohnson and BPickerCPA but I wanted to expand on a few points.

The IRA custodian generally will payout the year's RMD in the year of death before processing any rollover or transfer of assets. As Barry says, it still must be done but the custodian may handle it automatically.

The "at least as rapidly" rule only applies if the balance stays in the Husband's IRA. A spousal rollover to a new account allows a fresh choice of beneficiaries and a recalc or term certain election.

If the Husband's IRA is combined with the Wife's IRA, her beneficiary choices and recalc election made when distributions began will prevail. This could accelerate the distributions to her considerably.