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Old 11-04-2019, 08:34 AM
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Location: Dublin, CA
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IRA inherited from spouse aged 53

Hello,

My wife, aged 53, passed away in September this year. I am 71. I am the beneficiary of her (traditional) IRA. I understand that I have 4 choices:
1. Treat the IRA as my own, by becoming the owner.
2. Roll it into one of my existing IRAs.
3. Roll it into an annuity plan.
4. Remain as beneficiary of the IRA (I suppose my wife would continue to be the "owner"?)

My questions:
- What are the tax implications of each choice?
- My wife did not have to take Required Minimum Distribution. Do I have to? Can I avoid taking RMD if I opt for choice #4?
- If I choose choice #4, how do I indicate to the IRS that I am doing so?

Thanks!



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Old 11-05-2019, 01:48 PM
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Join Date: Oct 2010
Posts: 5,236
My wife, aged 53, passed away in September this year. I am 71. I am the beneficiary of her (traditional) IRA. I understand that I have 4 choices:
1. Treat the IRA as my own, by becoming the owner.
2. Roll it into one of my existing IRAs.
3. Roll it into an annuity plan.
4. Remain as beneficiary of the IRA (I suppose my wife would continue to be the "owner"?)

My questions:
- What are the tax implications of each choice?====>>for the choice 1,you can transfer the existing IRA into your name and defer distributions until RMDs are required .So,Once you hit age 70?, or the year following the owner's death, whichever is later. the IRS requires you to start withdrawing from the ira. and paying taxes on the irs

Choice 2;once you choose to roll over the inherited IRA assets to your own IRA, the rules for RMDs will apply. So, you must withdraw a certain amount of money from your IRA, including inherited assets, each year once you reach age 70?. So,Once you hit age 70?, the IRS requires you to start withdrawing from the ira. and paying taxes on the irs
choice 3; buying,transferring an annuity with IRA money is the same as moving your money from its current IRA trustee to another IRA trustee. This kind of transaction is considered a direct transfer or a direct rollover which is tax-free. You will owe taxes on the monthly income you receive but not on the transfer.

choice 4; the benefits of this type of election work in the limited situation where your spouse dies well before the age of 70 ?,the time when she would have to have begun taking RMDs.Leaving the account as is allows you,the surviving spouse, to defer taking RMDs until the deceased spouse would have been required to do so. you can then take distributions from the account without incurring the 10% early withdrawal penalty. This choice is generally not the most tax-efficient way to handle the inherited account, but it?s the simplest way.
the problem with this choiceis; Your required annual minimum withdrawal calculation for each year must be made using your single life-expectancy as the divisor. With this option , you?ll wind up with a smaller divisor, bigger minimum withdrawal amounts and more taxes.



- My wife did not have to take Required Minimum Distribution. Do I have to? ======>>as said above, in your case no. Leaving the account as is allows you,the surviving spouse, to defer taking RMDs until the deceased spouse would have been required to do so.

Can I avoid taking RMD if I opt for choice #4?
- If I choose choice #4, how do I indicate to the IRS that I am doing so====>>yes in your casesince, your spouse passed away well before the age of 70 ?,the time when she would have to have begun taking RMDs.



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Old 11-08-2019, 07:18 AM
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Join Date: Apr 2018
Location: Dublin, CA
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Thank you for your help, @Wnhough.
I'm not sure I understand why Choice #4 is "not the most tax-efficient way". Because, in all 4 choices I would be using my single-life expectancy as the divisor. But Choice #4 does allow me to defer taking RMD for many years.
Is there a form I need to send to the IRS to tell them that I'm opting for Choice #4?



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Old 11-08-2019, 11:55 AM
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Quote:
Originally Posted by 2davidc8 View Post
Thank you for your help, @Wnhough.
I'm not sure I understand why Choice #4 is "not the most tax-efficient way". Because, in all 4 choices I would be using my single-life expectancy as the divisor. But Choice #4 does allow me to defer taking RMD for many years.
Is there a form I need to send to the IRS to tell them that I'm opting for Choice #4?
Thank you for your help, @Wnhough.
I'm not sure I understand why Choice #4 is "not the most tax-efficient way". Because, in all 4 choices I would be using my single-life expectancy as the divisor.===>sorry my bad.not your case. choice 4 is. Goodfor youas since you are already over 59 ?, l mean. you can see, as said, the benefits of choice 4 type of election work in the limited situation where your spouse dies well before the age of 70 ? the time when she would have to have begun taking RMDs and you as the surviving spouse are under the age of 59 1/2. Then in this case, you would be hit with a 10% tax penalty if youwere to begin taking withdrawals before the age of 59 ? .


But Choice #4 does allow me to defer taking RMD for many years.
Is there a form I need to send to the IRS to tell them that I'm opting for Choice #4?=====>no form needed. I guess it will not generate a 1099R since it is non reportable transfersplz contact a retirement plan admin for help



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Old 11-12-2019, 05:01 AM
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Location: Dublin, CA
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Great, @Wnhough. Thank you for taking the time to reply!



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