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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 for inherited IRA? Date: 8/11/2010 11:34 AM
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Is an MRD required when the spouse is the benefiary of an inherited IRA? Fidelity is saying that no MRD is required. It is great, if this is true.
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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110868 of 121144
Subject: Re: MRD for inherited IRA? Date: 8/11/2010 12:07 PM
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Is an MRD required when the spouse is the benefiary of an inherited IRA?

It depends. See the discussion beginning on page 35 of Pub 590.

Phil
Rule Your Retirement Home Fool

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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: 110875 of 121144
Subject: Re: MRD for inherited IRA? Date: 8/11/2010 6:03 PM
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Surviving spouse. If you are a surviving spouse who is the sole beneficiary of your IRA, is the sole beneficiary of your deceased spouse’s IRA, you may elect to be treated as the owner and not as the beneficiary. If you elect to be treated as the owner, you determine the required minimum distribution (if any) as if you were the owner beginning with the year you elect or are deemed to be the owner. However, if you become the owner in the year your deceased spouse died, you are not required to determine the required minimum distribution for that year using your life; rather, you can take the deceased
owner’s required minimum distribution for that year (to the extent it was not already distributed to the owner before his or her death).


This looks like the applicable paragraph. The surviving spouse is under 59 1/2/

What is required to elect to be treated as the owner and not as the beneficiary? Is it possible for the IRA to remain an inherited IRA and have the surviving spouse treated as the owner and not the beneficiary?

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110877 of 121144
Subject: Re: MRD for inherited IRA? Date: 8/11/2010 8:27 PM
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This looks like the applicable paragraph. The surviving spouse is under 59 1/2/

As is too often the case with Pub 590, make sure you read to the end of the pertinent section (about RMD's). You may think at this point that you know everything, but you don't. For one thing, the deceased spouse's age is more important than the survivor's.

What is required to elect to be treated as the owner and not as the beneficiary?

The surviving spouse either rolls it over or just has the name changed.

Is it possible for the IRA to remain an inherited IRA and have the surviving spouse treated as the owner and not the beneficiary?

No. All by itself that question doesn't make any sense, so maybe we're going at this the wrong way. What's your "magic wand" story regarding this money?

Phil
Rule Your Retirement Home Fool

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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: 110882 of 121144
Subject: Re: MRD for inherited IRA? Date: 8/11/2010 10:19 PM
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No. All by itself that question doesn't make any sense, so maybe we're going at this the wrong way. What's your "magic wand" story regarding this money?

Since I don't understand how to phrase the question, let me try listing the items maybe important.

Deceased spouse would be 71.
Surviving spouse is 52.
The IRA is currently an Inherited IRA Beneficiary Distribution Account.

I believe, the following is true.

1.) Since the beneficiary is a spouse, the spouse can rollover the IRA to her own name.

2.) If rolled over into the spouse's name, withdrawls would be subject to early withdrawl penalty until the spouse is 59 1/2.

3.) If rolled over into the spouse's name, no MRD would be required until the spouse turns 70 1/2.

4.) If left in the Inherited IRA Beneficiary Distribution Account withdrawls can be made without being subject to early withdrawl penalities.

Now for the question to best I am able to phrase it

Given the ages of the surviving and deceased spouse, is it possible for the IRA to not be subject to MRD and distributions to not be subject to early withdrawl penalties?

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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110883 of 121144
Subject: Re: MRD for inherited IRA? Date: 8/11/2010 11:20 PM
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Since I don't understand how to phrase the question, let me try listing the items maybe important.
Deceased spouse would be 71.
Surviving spouse is 52.
The IRA is currently an Inherited IRA Beneficiary Distribution Account.

I believe, the following is true.
1.) Since the beneficiary is a spouse, the spouse can rollover the IRA to her own name.


Correct.

2.) If rolled over into the spouse's name, withdrawals would be subject to early withdrawal penalty until the spouse is 59 1/2.

Correct again.

3.) If rolled over into the spouse's name, no MRD would be required until the spouse turns 70 1/2.

Correct again.

4.) If left in the Inherited IRA Beneficiary Distribution Account withdrawals can be made without being subject to early withdrawal penalties.

Correct again. But they are subject to RMD rules. (It's usually spelled RMD - Required Minimum Distributions.)

Now for the question to best I am able to phrase it
Given the ages of the surviving and deceased spouse, is it possible for the IRA to not be subject to MRD and distributions to not be subject to early withdrawal penalties?


There's the problem. That sounds like two questions. It's an either/or thing. And it sounds like you understand the rules.

She can take the IRA and roll it over to an account in her own name. Then there's no RMD for her until age 70 1/2. But distributions before 59 1/2 will be subject to the early distribution 10% penalty.

If it's left in the account titled in the name of the deceased, F/B/O surviving spouse as beneficiary, there will be an RMD, but at age 52 that will not be large. And she can always take more than the minimum, since the payouts are due to death, there's no 10% early distribution penalty. She doesn't have to lock herself into a lifetime payout plan.


Bill

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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: 110884 of 121144
Subject: Re: MRD for inherited IRA? Date: 8/11/2010 11:54 PM
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f it's left in the account titled in the name of the deceased, F/B/O surviving spouse as beneficiary, there will be an RMD, but at age 52 that will not be large. And she can always take more than the minimum, since the payouts are due to death, there's no 10% early distribution penalty. She doesn't have to lock herself into a lifetime payout plan.


Bill


This is where the confusion exists. After talking with the IRA administrator, she believes she was told that she could have it both ways: No RMD and no early distribution penalty. I verifying that my understanding was correct before talking with the IRA administrator.

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110885 of 121144
Subject: Re: MRD for inherited IRA? Date: 8/12/2010 12:22 AM
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This is where the confusion exists. After talking with the IRA administrator, she believes she was told that she could have it both ways: No RMD and no early distribution penalty. I verifying that my understanding was correct before talking with the IRA administrator.



<<butting in>> (i did read th Pub about eight times)

i think the age=71 makes it problematic

as i understand it, if the deceased were subject to RMDs, the inherited IRS is subject to them (but w/ inheritor's life table)

if not, then not. so if deceased was 69, survivor can have it both ways.

but 71 is more than 70.5 and RMDs kick in the year *following* age 70.5 --
so it depends on exactly when he turned 71 and when he died.

eg, turn 70.5 and 71 and die in same year -- no RMD (near as i can tell)
die in the year following and RMD maybe

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110886 of 121144
Subject: Re: MRD for inherited IRA? Date: 8/12/2010 3:54 AM
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but 71 is more than 70.5 and RMDs kick in the year *following* age 70.5 --
so it depends on exactly when he turned 71 and when he died.


Not quite. For the owner the question is when you turn 70 1/2. Your first RMD must be taken for the year in which you turn 70 1/2, but you can delay taking it until April 1 of the following year, which is called the required beginning date.

For the beneficiary the question is whether the owner died before or after the required beginning date.

I think we've now settled that OP was wondering whether it's possible for a spousal beneficiary to avoid the RMD's that come with an inherited IRA but retain the flexibility to take funds as desired before age 59 1/2. The answer to that is maybe, up to a point.

Note the bullet on page 36 of Pub 590 in the section on calculating the RMD. A spouse beneficiary may be able to delay RMD's on an inherited IRA until the owner would have reached 70 1/2. In OP's case the owner had already reached that age, so this provision is moot in that case.

Phil
Rule Your Retirement Home Fool

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110887 of 121144
Subject: Re: MRD for inherited IRA? Date: 8/12/2010 4:11 AM
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but 71 is more than 70.5 and RMDs kick in the year *following* age 70.5 --
so it depends on exactly when he turned 71 and when he died.
============
Not quite. For the owner the question is when you turn 70 1/2. Your first RMD must be taken for the year in which you turn 70 1/2, but you can delay taking it until April 1 of the following year, which is called the required beginning date.

For the beneficiary the question is whether the owner died before or after the required beginning date.


sort of what i was getting at (clumsily to say the least)

that RMDs depend on exactly when the deceased died.


Note the bullet on page 36 of Pub 590 in the section on calculating the RMD.


gaah ..it's even more complicated than i remembered.

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