Life and Death Planning for Retirement Benefits

158 / 507

158 Life and Death Planning for Retirement Benefits
3. Failure to take an RMD. The third way to make the election is for the surviving
spouse to fail to take, by the applicable deadline, “any amount” that is required to
be distributed to her as a beneficiary under the minimum distribution rules. Reg.
A-5(b)(1); PLR 2001-21073. Note that even a $1 shortfall in the RMD
would trigger this deemed election (under the “any amount” standard).
If the participant died after his RBD, then the beneficiary (including a surviving spouse
who is beneficiary) is required to take the RMD for the year of the participant’s death to the extent
he did not take it himself. See A). As an RMD, this distribution cannot be rolled over by
a surviving spouse-beneficiary; furthermore, she cannot roll over the inherited plan until after she
has taken this RMD. Even if the inherited plan is an IRA and the spouse elects to treat
the account as her own in the same year as the participant died she still has to take out this
distribution. Reg. A-5(a). Because this RMD must be taken regardless of whether the
spouse elects to treat the inherited IRA as her own, it is not clear whether the surviving spouse’s
failure to take this RMD in full would be deemed an automatic election by her to treat the inherited
IRA as her own; it seems that it should NOT trigger that rule, but there is no authority or guidance
on point.
E. When spousal election may be made. The spousal election may “be made at any time
after the individual’s date of death,” including after the surviving spouse’s own RBD or
Required Commencement Date. See PLR 9311037.
F. Rollovers also permitted. The Code and regulations never explicitly state that the
surviving spouse (without electing to treat the deceased participant’s IRA as the surviving
spouse’s own IRA) can simply roll over distributions that she receives from the decedent’s
IRA, as she can with distributions she receives from a QRP or 403(b) plan inherited from
the deceased participant . The Preamble to the final minimum distribution
regulations corrects this oversight by stating that “If the spouse actually receives
a distribution from the IRA, the spouse is permitted to roll that distribution over within 60
days into an IRA in the spouse’s own name to the extent that the distribution is not a
required distribution, regardless of whether or not the spouse is the sole beneficiary of the
IRA owner.” TD 9897, 67 FR 18987 (4/17/02). For examples of spousal rollovers of
distributions from inherited IRAs, see PLRs 9842058 and 2009-34046.
3.2.04 Roth conversion by surviving spouse
See regarding Roth IRAs and “conversions” from traditional plans and
IRAs into Roth IRAs
Since the surviving spouse has, with respect to QRP and 403(b) benefits left outright to
her, every option the deceased participant would have had for those benefits (see , the
surviving spouse can roll over the benefits into a Roth IRA just as the deceased participant could
have done (see B)). She can also roll traditional IRA benefits inherited from the deceased
participant into a Roth IRA (se F)). The recipient Roth IRA could be either her own Roth
IRA or a Roth IRA in the name of the deceased participant payable to the surviving spouse as
beneficiary (see .
Having converted an inherited traditional plan or IRA to a Roth IRA, the surviving spouse
would have the same options as other Roth-converters to (1) recharacterize the conversion (see