Reply To: Spouse as sole beneficiary of TIRA

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Alan S.

First paragraph – Yes, except that in the year he would have reached 70.5, she would only be about 56. If she assumed ownership that year, there would be no RMDs for her because she is treated as the owner the entire year. But by owning the IRA at 56, any distributions she would take prior to 59.5 would be subject to the 10% penalty. Therefore, the choice boils down to the need for distributions for 3 plus years. If she will need them best to take the small beneficiary RMDs penalty free. If does not need them and prefers to avoid RMDs that are not needed, then she could assume ownership. This can also be done partially, ie do a spousal rollover for part she will own and leave the rest as inherited until 59.5.

Paragraph 2 – interesting. If the early RMD years will have RMDs cut by 5-6%, those higher balances will start to erode the advantage of the new divisors. There will also be larger distributions after the first spouse has passed that will be taxable to single filers.