How to handle Required Minimum Distributions when the original beneficiary dies and a successor beneficiary takes over.
survivors
What Options Are Available for a Surviving Spouse Who Inherits an IRA?
First Spouse Program bronze medal (Photo credit: Wikipedia) When the owner of an IRA dies and leaves the IRA to his or her spouse as the sole beneficiary, there are some unique options available for handling this inherited IRA. Keep in mind that these options are only available to a spouse a beneficiary – a non-spouse beneficiary has much more limited options available. Options for a Spousal Beneficiary of an IRA The first and easiest option is for the spouse to leave the IRA exactly where it is and do nothing. In this manner, the IRA will continue to exist as belonging to the deceased spouse – for a time. If the deceased spouse was over age 70½ years of age and subject to Required Minimum Distributions (RMDs), the surviving spouse could elect to continue receiving those RMDs using his or her late spouse’s lifetime as the distribution factor. On […]
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The Social Security Survivor Benefit – Part 1
Image via Wikipedia In a previous article we reviewed the very confusing Social Security Spousal Benefit. That article raised a lot of questions from readers about another confusing provision of the Social Security system: the Survivor Benefit. As with all of these discussions, don’t expect to immediately understand it – this stuff is complicated, and even the Social Security staff often have difficulty explaining it. Read through this carefully, see the referenced articles for background, and then re-read as needed. And ask questions if you have them. The Survivor Benefit is not related to the Spousal Benefit, although certain portions of the article with further explanations of the Spousal Benefit will be useful to review as we discuss the Survivor Benefit. To start with, there are two benefits available to the spouse of a deceased Social Security participant. The first is a small death benefit, amounting to $255 in a […]
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Calculating RMDs for Various IRA Beneficiaries
There are a few different ways that Required Minimum Distributions are calculated for beneficiaries of IRAs. The two primary determining factors are: Is the beneficiary the spouse of the original owner? and Did the original owner attain age 70½ prior to death? There are two more factors that also have an impact on the nature of the calculations, although the impact is different: Is there more than one beneficiary? and Is the beneficiary a person or an entity, such as a trust, a charity or the estate of the original owner? Image via Wikipedia Spouse If the beneficiary is the spouse of the original owner of the account, and the original owner died before age 70½, then the rule is that no RMDs are required until the owner would have reached age 70½. At that time the beneficiary will use the Single Life table to calculate the distribution amount based […]
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