IRA 5yr rule

[Burke]

Thanks to everyone, but I'm getting information from all over the map on this. Is there a reliable Code Reg or Pub?

All this has sent me scurrying for Publ 590, a whopping 110 pages of voluminous information (including tables).

Some noteworthy items:
Page 37, 5-yr Rule:
"If you are an individual, you can elect to take the entire account by the end of the 5th yr following the year of the owner's death. If you make this election, do not use a [RMD] table. For 2009, the distribution can be waived, effectively taking distributions over a 6-yr period."

Page 35:
Owner Died Before Required Beginning Date:
"If the owner died before his or her RBD, base [your] RMD for years after the year of the owner's death generally on your single life expectancy." For an estate or trust, "the entire account must be distributed by the end of the fifth year following the year of the owner's death."


Owner Died On or After RBD:
"If the owner died on or after his RBD,...,you generally must base RMD for years after the year of the owner's death on the longer of:

1. Your single life expectancy as shown on Table 1, or
2. The owner's life expectancy as determined under Death on or After RBD under Beneficiary not an Individual (ie. trust or estate.)

These rules have been changed and revised so many times, it gives me a headache just trying to keep them straight. Happy reading, Snag. I can understand why you don't know what's up or down.

[taxcraft]

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[Gene V]

Ttb

Thanks to everyone, but I'm getting information from all over the map on this. Is there a reliable Code Reg or Pub?

I been using the TTB-lots of information, especially page 13-24.

From page 1-24, also letter ruling on this page

Inherited IRA by Surviving Spouse
If the beneficiary of an IRA is the surviving spouse of the decedent,
the surviving spouse can treat the IRA as his or her own.
This means the surviving spouse can make additional contributions
to the IRA, make rollover contributions to the IRA, or rollover
the IRA into another IRA or employer-sponsored pension
plan. In general, a beneficiary who is not a surviving spouse must
take distributions of the entire account balance by the end of the
fifth year or take distributions under the RMD rules.

From page 13-24

3) If the beneficiary is the surviving spouse of the deceased IRA
participant, the beneficiary can treat the IRA as his or her own.
This allows the beneficiary to make additional contributions
to the IRA (including rollover contributions). It also allows the
beneficiary to use RMD rules based on the beneficiary’s life.
Early withdrawal penalty rules apply if the surviving spouse is
under age 59½.

[Snaggletooth]

Citation

Thanks to everyone, but I'm getting information from all over the map on this. Is there a reliable Code Reg or Pub?

[Lion]

Spouse

A spouse can treat the IRA as her own. A non-spouse has restrictions.

[Burke]

I think you will find you cannot leave it in the decedent's account with his SSN. Most custodians will require it to be transferred into an account in the beneficiary's name no matter whether it is a spouse or other person, so that reporting rules can be observed, and withholding taxes are reported under the correct recipient's SSN. Even if it is going to be surrendered in full. We are dealing with Fidelity on that very issue right now. And I think, that while it used to be that a non-spouse had to withdraw all funds within 5 years, they now may take distributions over their lifetime(s). When a spouse rolls over an inherited IRA (or anyone for that matter) it does not lose its status. It is still an inherited IRA, code 4 on withdrawals, no penalties. No addl monies can be added to it. If the spouse and/or bene qualifies for contributions to an IRA on their own, they must put it in a separate account.

[Snaggletooth]

More

I've done some more looking around, and apparently what John says is true, a surviving spouse is not limited to a 5 year withdrawal period.

However, it might also be that in order to be exempt from the 10% penalty, the surviving spouse must leave the IRA as is, and NOT roll it over into her OWN IRA. If she does this, and then withdraws before reaching age 59.5, she loses the penalty exemption for death.

Anyone know more about this that they wish to share??

[JohnH]

I'm not in my office, but will give this a stab. The spouse of a deceased person can transfer the IRA into their own IRA and treat it according to their own RMD rules. Non-spouse beneficiaries can choose to withdraw at whatwever rate they wish, as long as it's all withdrawn within 5 years, provided the IRA owner died before beginning RMD's. (I think this is the only time the 5-year rule comes into play). On the other hand, if the IRA owner was already receiving RMD's, the non-spouse beneficiary must continue withdrawals at least at a rate which equals the remaining life of the deceased, regardless of the age of the non-spouse beneficiary. Of course, any of the above can withdraw it all and pay tax on it all at once. I'm sure there are other variations I haven't addressed.

[Snaggletooth]

I listened to so much doze-worthy lectures in seminars on IRAs, and there are so many rules and variations, I don't know what's up or down sometimes.

Is there a 5-year rule on an inherited TRADITIONAL IRA? as in Income in Respect of a Decedent? I looked in TTB and found a ton of 5 yr information on Roth IRAs, but not on a Traditional IRA. I'll admit sometimes I can look directly at a printed page and still miss it.

Seems like I remember if a beneficiary inherits a traditional IRA, they must cash it out within 5 years. Anyone know anything about this? I think I'm dealing with someone who is just now tapping into the IRA of her dead husband who died 15 years ago...