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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121144  
Subject: MRD Date: 12/23/2008 10:22 AM
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The situation is that the IRA owner turned 70 1/2 in 2008 and recently passed away. It was thought that the MRD had been requested. Fidelity is claiming that the required form wasn't submitted. At least, we know that the MRD hasn't been done and have until April 1st to fix the problem without penalty. The IRA will be inherited by the surviving spouse.

If I understand her options they are to transfer the IRA to an inherited IRA or to her own name. It is likely that she will need to draw against the IRA, therefore; an inherited IRA may be the best option.

When an IRA is transferred to the spouse, it becomes their IRA. I believe, that the required MRD for 2008 would be made from the original IRA and the balance transferred to the new IRA.

We talked with Fidelity, but some details remain unclear. If the IRA is transferred to an inherited IRA, it is required to continue MRDs. For 2008, it should be possible to specify an amount based on their combined life expectancy. After the transfer, MRDs could be based on her age. It wasn't clear if the first MRD would be from his or her IRA, but since the spouse is the only beneficiary of the IRA and estate that does not appear to make much difference.

I have two questions:

1.) Can an inherited IRA be transfered to a spouse's name at any time or only when the spouse reaches 59 1/2?

2.) Can the spouse take distributions in addition to the MRD from an inherited IRA without penalty?

Debra
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