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Assume:

  1. Alice (63) and Bob (68) are married and each has both a traditional and Roth IRA
  2. Bob's IRA beneficiary designation is 60% to Alice and 40% to his brother Charlie (58), on both the traditional and Roth IRA.

When Bob dies, his brother is required to keep the 40% he inherited in a separate account and begin taking RMDs based on his (Charlie's) life expectancy, starting the tax year after Bob's death.

My question is about the rules for Alice. It is clear that if the beneficiary designation had given her 100%, she could "assume" the account directly into her own IRA. The rules I've been able to find are not explicit about her options when she inherits less than 100%. Direct assumption does not seem to be possible, but it appears that she still has two options:

  1. Leave the inherited funds in the separate account and take RMD based on her life expectancy starting the following year.
  2. Roll the assets over into her own IRAs and delay RMDs until 70½.

To clarify more -- When Bob dies, the custodian splits each IRA 60/40 into two new accounts. the 40% portions go to Charlie, who is required to start RMDs the following year based on his (Charlie's) life expectancy. Charlie CANNOT move/rollover the inherited assets to any other account.

My question applies to Alice's 60% which she also receives initially as "Inherited IRA" accounts. Is she free to then assume those accounts (i.e. roll the assets into her personal accounts) thus delaying RMDs until she turns 70½?

  • Note to any member trying to help. The question is regarding Alice, not Charlie. – JoeTaxpayer May 7 '17 at 21:35
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The broker will help you split the account in 2, one as an inherited IRA, subject to RMDs, and the other, IRA moved into spouse's name which will not have RMDs till age 70 for traditional or none for Roth.

The only reasons I can think of to not pull account not into own name but keep as inherited:

Survivor is young, but wants to take withdrawals pre-59-1/2 with no penalty.

Survivor has IRA that wasn't deductible and wishes to convert to Roth without including the extra money in the tax math.

Edit - to address the last paragraph above which seems to be the summary for this question, she has until December 31 to elect to treat it as her own IRA and should retitle it as such. You stated that she already has it in an account designated "beneficiary IRA." Again, she has until Dec 31 of year after death to transfer into her own name, just as if it were always her account.

  • I think "spousal IRA" is not the right word here; spousal IRA usually refers to IRAs opened by non working people using their spouse's compensation as satisfying the "must have compensation" rule. Also, I think Pub 590b says that the owner can separate the IRA into two parts so that the spouse inherits her share free and clear of arcane rules (especially since Bob will soon be 70.5 and once he starts RMDs, the rules change and change again when he passes the required starting date which is not the same as the 70.5 birthday.) – Dilip Sarwate May 6 '17 at 13:55
  • I corrected to get rid of 'spousal'. You are right. – JoeTaxpayer May 6 '17 at 14:02
  • I edited and clarified my question. Does your answer still apply? – Jim Garrison May 6 '17 at 20:12

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