Spousal/Inherited IRA

How do I reflect an inherited IRA from my spouse to me? Seems the software reflects total withdrawal at her our anticipated end of life and hence large tax hit. As I understand it I can inherit her IRA and not take a major withdrawal.


dan royer's picture

The software will automatically have the survivor inherit the other's IRA or qualified accounts. (Pensions are a different matter and depend on how they are entered in the program).

I'm not sure what you are seeing with regard to a "total withdrawal." It sounds like you've modeled the wife to die before you and you are seeing a lump sum withdrawal instead of smooth withdrawal? I'm confused as to what you are seeing I guess. It would help if I saw the report.

Thanks for the reply.
I currently have my wife's life expectancy to age 71 and I see 1/2 of her IRA balance as a withdrawal at age 70 and the other 1/2 at age 71 leaving a zero balance at end. There is a corresponding huge fed and state tax during those years. What may be causing this is under retirement Accts - Key Ages I have my wife's age of first smooth withdrawal at age 70 and last for age 71. I cannot pick anything after age 71 for her.
Thanks, Roger

Perhaps you'll be better off setting your wife's key age so her last smooth withdrawal is what her regular life expectancy, then test the effect of your inheriting her IRA in contingent plans. I gather that by setting her last smooth withdrawal to age 71 in key ages, if forces all withdrawals to be split in those 2 years, regardless of when she dies. In that case you pay whopping taxes and there's nothing left in her IRA for you to inherit.

If you use contingent planning instead, set her key age to her expected date of death. Then, when creating a report, enable survivor reports and set your age at start of survivor report to correspond to the year in which she's 71. Your continent survivor report will then show her assets in your retirement account, without paying income taxes.

If you want to force withdrawal of half of her IRA assets in her age 70 year, do that with a special withdrawal, but only in that year. Leave the others to ESP to manage. By that, you'll get half of her IRA withdrawn the year before she dies (and pay commensurate income taxes), followed by your inheriting the remainder.

There probably are adjustments to be made to my suggestions, but I think contingency reports are a better approach to see what you expect.

(a user)

That did take care of the taxable hit I saw. Thanks for the suggestion.

I'm happy to be of help.

Dan is correct, the deceased's retirement account balance is added to the survivor's retirement account banance and there are no federal income taxes on the transfer.
What you're seeing must be caused by something else. Please open a support ticket and upload your database if you want us to look into it.

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