Surviving Spouse IRA Options

Published by kylegaze on

Surviving Spouse IRA Options

Surviving spouses who are designated beneficiaries of a deceased spouse’s IRAs must decide whether to roll them over into their own IRAs, or leave the IRAs in the deceased spouse’s name. This Practice Alert explains each alternative, and covers strategies for younger surviving spouses who may need to withdraw money from the deceased spouse’s IRAs before they attain age 59 1/2.

Surviving spouse’s options for decedent spouse’s IRAs. A surviving spouse who is the sole designated beneficiary of the deceased spouse’s IRA has a choice not available to other beneficiaries: The spouse may roll over the decedent’s IRA into an IRA established in the spouse’s own name, or elect to treat the decedent’s IRA as the surviving spouse’s own IRA. (Code Sec. 408(d)(3); Reg. § 1.408-8, Q&A 5(a)) Either way, the surviving spouse is treated as if he or she had funded the IRA. 

There are three major advantages to making the spousal rollover or election:

 (1) Ability to name own beneficiaries, keep IRA going longer. By making the rollover or election, the surviving spouse can name his or her own beneficiaries for the IRA and give the IRA a longer life-span if children, grandchildren or other younger family members or friends are named as beneficiaries. 

The following favorable payout rules apply if the surviving spouse makes the rollover or election and thus becomes the IRA owner:

  • If the IRA owner dies on or after the required beginning date (RBD, usually April 1 of the calendar year following the calendar year in which the individual reaches age 70 1/2) and designated a nonspouse beneficiary for the account, the IRA balance is paid out over the longer of: 
    (1) the remaining life expectancy of the designated beneficiary, using the beneficiary’s attained age in the year immediately following the year of the IRA owner’s death, or 
    (2) the remaining life expectancy of the IRA owner, using the owner’s attained age in the year of his death. (Reg. § 1.401(a)(9)-5, Q&A 5(a), Q&A 5(c)) 
  • If the IRA owner dies before the RBD, and designated a nonspouse beneficiary for the account, one of two payout methods apply depending on the terms of the IRA: 
    (1) Under the five-year method, the individual’s entire account must be distributed no later than Dec. 31 of the calendar year containing the fifth anniversary of his death; (Code Sec. 401(a)(9)(B)(ii)) 
    (2) Under the life expectancy method, annual RMDs are made over the beneficiary’s life or over a period not extending beyond his or her life expectancy, and must begin no later than December 31 of the calendar year immediately following the calendar year in which the individual died. (Code Sec. 401(a)(9)(B)(iii); Code Sec. 408(a)(6))

By contrast, if the rollover or election isn’t made, the survivor doesn’t have the opportunity to name other beneficiaries for the account. Additionally, the balance remaining in the decedent’s IRA will be distributed over what remains of the payout period that applied when the surviving spouse began receiving required minimum distributions (RMDs) from the decedent’s account. Often, this payout period will be the surviving spouse’s life expectancy. The bottom line is that if the IRA remains in the decedent’s name, the tax-deferred IRA will have a shorter lifespan than if the spousal rollover or election is made.

 (2) Required beginning date may be deferred. With the rollover or election, the RBD for distributions is April 1 of the year following the year in which the surviving spouse attains age 70 1/2. 

However, if the IRA remains in the decedent’s name, and he or she died before lifetime distributions commenced, then lifetime distributions to the spouse generally must begin by the later of:
(1) Dec. 31 of the year following the year in which the decedent died, or 
(2) Dec. 31 of the year in which the decedent would have attained age 70 1/2 had he or she lived. (Code Sec. 401(a)(9)(B)(iv)(I), Reg. § 1.401(a)(9)-3, Q&A 3(b))

If the IRA owner died after required distributions began, and the rollover or election isn’t made, payouts to the spouse-beneficiary must begin in the year following the IRA owner’s death. 

Thus, a surviving spouse who is younger than the decedent can defer the start of the payout period by making the rollover or electing to treat the decedent’s IRA as her own.

 (3) More favorable RMD rules. After the rollover or election, the receiving IRA is treated as if the surviving spouse had funded it. When the surviving spouse attains the RBD, he or she can compute required minimum distributions (RMDs) using the uniform life expectancy table for IRA owners age 70 and older (Reg. § 1.401(a)(9)-5, Q&A 4(a)). This table, which carries the same life expectancies which apply under the Joint and Last Survivor Table of Reg. § 1.401(a)(9)-9, Q&A 3, I of Reg. § 1.72-9) to an age 70 or older person and a survivor exactly ten years younger, results in smaller annual RMDs and a longer payout period than the Single Life Table (in Reg. § 1.401(a)(9)-9, Q&A 1) used to compute RMDs paid to a surviving spouse as beneficiary (rather than the owner) of the decedent’s IRA (Reg. § 1.401(a)(9)-5, Q&A 6). Note that a separate lifetime distribution table applies if the spouse is more than ten years younger than the IRA owner. (Reg. § 1.401(a)-9, Q&A 3)

Young surviving spouses. If the surviving spouse is younger than age 59 1/2, the rollover election could have a significant disadvantage: Once the spouse elects to roll over the decedent’s IRA into his or her own IRA, pre-age-59 1/2 withdrawals from that IRA generally will be subject to the 10% penalty tax on top of regular income taxes unless a Code Sec. 72(t) exception applies (e.g., withdrawals in the form of substantially equal periodic payments). For a recent illustration of this potential tax trap, see Sears, TC Memo 2010-146, where a surviving spouse got hit with a $6,000-plus penalty for making premature withdrawals from an IRA containing funds rolled over from her deceased husband’s IRA.

By contrast, if the rollover election is not made, pre-age-59 1/2 withdrawals from the decedent’s IRA will not be subject to the penalty tax. Under Code Sec. 72(t)(2)(A)(ii), distributions made to a beneficiary (or estate) on or after the death of the IRA owner are excepted from the 10% penalty tax. Thus, if the surviving spouse winds up tapping the decedent’s retirement funds before attaining age 59 1/2, the rollover election could result in imposition of the 10% penalty tax.

IRA payout strategy for the younger spouse. The surviving spouse should keep the entire IRA balance in the decedent’s name until the spouse attains age 59 1/2. This way, any withdrawals before that age will be penalty-tax-free. When the spouse attains age 59 1/2, he or she can roll over the IRA into an IRA in the spouse’s own name. The regs make it clear that a surviving spouse beneficiary’s election to treat the decedent’s IRA as her own can be made “any time after the individual’s date of death.” (Reg. § 1.408-8, Q&A 5(a))

RIA observation: In other words, the fact that the surviving spouse takes distributions from the decedent’s IRA before the survivor attains age 59 1/2 won’t affect his or her ability to make a rollover after age 59 1/2.

RIA observation: IRS does not explain how to determine when a retirement account owner attains age 59 1/2. However, the regs do explain when a person reaches age 70 1/2 for purposes of the required beginning date rules for distributions under Code Sec. 401(a)(9). Under Reg. § 1.401(a)(9)-2, Q&A 3, a person attains age 70 1/2 as of the date that is six months after the 70th anniversary of his birth. Presumably, the determination of when a person reaches age 59 1/2 is made in the same manner, i.e., the date that is six months after that person’s 59th birthday.

RIA illustration : The 59th anniversary of Susan’s birth was on July 1, 2010. Susan will be 59 1/2 on Jan. 1, 2011. Distributions from her IRAs on or after Jan. 1, 2011 are penalty-tax-free. Distributions before that date will be subject to the 10% penalty tax, unless an exception applies.

Source:  Federal Tax Updates on Checkpoint Newsstand tab 8/2/2010


xosotin chelseathông tin chuyển nhượngcâu lạc bộ bóng đá arsenalbóng đá atalantabundesligacầu thủ haalandUEFAevertonxosofutebol ao vivofutemaxmulticanaisonbethttps://bsport.fithttps://onbet88.ooohttps://i9bet.bizhttps://hi88.ooohttps://okvip.athttps://f8bet.athttps://fb88.cashhttps://vn88.cashhttps://shbet.atbóng đá world cupbóng đá inter milantin juventusbenzemala ligaclb leicester cityMUman citymessi lionelsalahnapolineymarpsgronaldoserie atottenhamvalenciaAS ROMALeverkusenac milanmbappenapolinewcastleaston villaliverpoolfa cupreal madridpremier leagueAjaxbao bong da247EPLbarcelonabournemouthaff cupasean footballbên lề sân cỏbáo bóng đá mớibóng đá cúp thế giớitin bóng đá ViệtUEFAbáo bóng đá việt namHuyền thoại bóng đágiải ngoại hạng anhSeagametap chi bong da the gioitin bong da lutrận đấu hôm nayviệt nam bóng đátin nong bong daBóng đá nữthể thao 7m24h bóng đábóng đá hôm naythe thao ngoai hang anhtin nhanh bóng đáphòng thay đồ bóng đábóng đá phủikèo nhà cái onbetbóng đá lu 2thông tin phòng thay đồthe thao vuaapp đánh lô đềdudoanxosoxổ số giải đặc biệthôm nay xổ sốkèo đẹp hôm nayketquaxosokq xskqxsmnsoi cầu ba miềnsoi cau thong kesxkt hôm naythế giới xổ sốxổ số 24hxo.soxoso3mienxo so ba mienxoso dac bietxosodientoanxổ số dự đoánvé số chiều xổxoso ket quaxosokienthietxoso kq hôm nayxoso ktxổ số megaxổ số mới nhất hôm nayxoso truc tiepxoso ViệtSX3MIENxs dự đoánxs mien bac hom nayxs miên namxsmientrungxsmn thu 7con số may mắn hôm nayKQXS 3 miền Bắc Trung Nam Nhanhdự đoán xổ số 3 miềndò vé sốdu doan xo so hom nayket qua xo xoket qua xo so.vntrúng thưởng xo sokq xoso trực tiếpket qua xskqxs 247số miền nams0x0 mienbacxosobamien hôm naysố đẹp hôm naysố đẹp trực tuyếnnuôi số đẹpxo so hom quaxoso ketquaxstruc tiep hom nayxổ số kiến thiết trực tiếpxổ số kq hôm nayso xo kq trực tuyenkết quả xổ số miền bắc trực tiếpxo so miền namxổ số miền nam trực tiếptrực tiếp xổ số hôm nayket wa xsKQ XOSOxoso onlinexo so truc tiep hom nayxsttso mien bac trong ngàyKQXS3Msố so mien bacdu doan xo so onlinedu doan cau loxổ số kenokqxs vnKQXOSOKQXS hôm naytrực tiếp kết quả xổ số ba miềncap lo dep nhat hom naysoi cầu chuẩn hôm nayso ket qua xo soXem kết quả xổ số nhanh nhấtSX3MIENXSMB chủ nhậtKQXSMNkết quả mở giải trực tuyếnGiờ vàng chốt số OnlineĐánh Đề Con Gìdò số miền namdò vé số hôm nayso mo so debach thủ lô đẹp nhất hôm naycầu đề hôm naykết quả xổ số kiến thiết toàn quốccau dep 88xsmb rong bach kimket qua xs 2023dự đoán xổ số hàng ngàyBạch thủ đề miền BắcSoi Cầu MB thần tàisoi cau vip 247soi cầu tốtsoi cầu miễn phísoi cau mb vipxsmb hom nayxs vietlottxsmn hôm naycầu lô đẹpthống kê lô kép xổ số miền Bắcquay thử xsmnxổ số thần tàiQuay thử XSMTxổ số chiều nayxo so mien nam hom nayweb đánh lô đề trực tuyến uy tínKQXS hôm nayxsmb ngày hôm nayXSMT chủ nhậtxổ số Power 6/55KQXS A trúng roycao thủ chốt sốbảng xổ số đặc biệtsoi cầu 247 vipsoi cầu wap 666Soi cầu miễn phí 888 VIPSoi Cau Chuan MBđộc thủ desố miền bắcthần tài cho sốKết quả xổ số thần tàiXem trực tiếp xổ sốXIN SỐ THẦN TÀI THỔ ĐỊACầu lô số đẹplô đẹp vip 24hsoi cầu miễn phí 888xổ số kiến thiết chiều nayXSMN thứ 7 hàng tuầnKết quả Xổ số Hồ Chí Minhnhà cái xổ số Việt NamXổ Số Đại PhátXổ số mới nhất Hôm Nayso xo mb hom nayxxmb88quay thu mbXo so Minh ChinhXS Minh Ngọc trực tiếp hôm nayXSMN 88XSTDxs than taixổ số UY TIN NHẤTxs vietlott 88SOI CẦU SIÊU CHUẨNSoiCauVietlô đẹp hôm nay vipket qua so xo hom naykqxsmb 30 ngàydự đoán xổ số 3 miềnSoi cầu 3 càng chuẩn xácbạch thủ lônuoi lo chuanbắt lô chuẩn theo ngàykq xo-solô 3 càngnuôi lô đề siêu vipcầu Lô Xiên XSMBđề về bao nhiêuSoi cầu x3xổ số kiến thiết ngày hôm nayquay thử xsmttruc tiep kết quả sxmntrực tiếp miền bắckết quả xổ số chấm vnbảng xs đặc biệt năm 2023soi cau xsmbxổ số hà nội hôm naysxmtxsmt hôm nayxs truc tiep mbketqua xo so onlinekqxs onlinexo số hôm nayXS3MTin xs hôm nayxsmn thu2XSMN hom nayxổ số miền bắc trực tiếp hôm naySO XOxsmbsxmn hôm nay188betlink188 xo sosoi cầu vip 88lô tô việtsoi lô việtXS247xs ba miềnchốt lô đẹp nhất hôm naychốt số xsmbCHƠI LÔ TÔsoi cau mn hom naychốt lô chuẩndu doan sxmtdự đoán xổ số onlinerồng bạch kim chốt 3 càng miễn phí hôm naythống kê lô gan miền bắcdàn đề lôCầu Kèo Đặc Biệtchốt cầu may mắnkết quả xổ số miền bắc hômSoi cầu vàng 777thẻ bài onlinedu doan mn 888soi cầu miền nam vipsoi cầu mt vipdàn de hôm nay7 cao thủ chốt sốsoi cau mien phi 7777 cao thủ chốt số nức tiếng3 càng miền bắcrồng bạch kim 777dàn de bất bạion newsddxsmn188betw88w88789bettf88sin88suvipsunwintf88five8812betsv88vn88Top 10 nhà cái uy tínsky88iwinlucky88nhacaisin88oxbetm88vn88w88789betiwinf8betrio66rio66lucky88oxbetvn88188bet789betMay-88five88one88sin88bk88xbetoxbetMU88188BETSV88RIO66ONBET88188betM88M88SV88Jun-68Jun-88one88iwinv9betw388OXBETw388w388onbetonbetonbetonbet88onbet88onbet88onbet88onbetonbetonbetonbetqh88mu88Nhà cái uy tínpog79vp777vp777vipbetvipbetuk88uk88typhu88typhu88tk88tk88sm66sm66me88me888live8live8livesm66me88win798livesm66me88win79pog79pog79vp777vp777uk88uk88tk88tk88luck8luck8kingbet86kingbet86k188k188hr99hr99123b8xbetvnvipbetsv66zbettaisunwin-vntyphu88vn138vwinvwinvi68ee881xbetrio66zbetvn138i9betvipfi88clubcf68onbet88ee88typhu88onbetonbetkhuyenmai12bet-moblie12betmoblietaimienphi247vi68clupcf68clupvipbeti9betqh88onb123onbefsoi cầunổ hũbắn cáđá gàđá gàgame bàicasinosoi cầuxóc đĩagame bàigiải mã giấc mơbầu cuaslot gamecasinonổ hủdàn đềBắn cácasinodàn đềnổ hũtài xỉuslot gamecasinobắn cáđá gàgame bàithể thaogame bàisoi cầukqsssoi cầucờ tướngbắn cágame bàixóc đĩaAG百家乐AG百家乐AG真人AG真人爱游戏华体会华体会im体育kok体育开云体育开云体育开云体育乐鱼体育乐鱼体育欧宝体育ob体育亚博体育亚博体育亚博体育亚博体育亚博体育亚博体育开云体育开云体育棋牌棋牌沙巴体育买球平台新葡京娱乐开云体育mu88qh88
Categories: Uncategorized