A surviving spouse who is the primary beneficiary of her or his deceased spouse’s IRA is treated differently than non-spouse beneficiaries. The surviving spouse may elect to treat the deceased spouse’s IRA as the surviving spouse’s IRA or roll over the deceased spouse’s IRA to an IRA held in the surviving spouse’s name, called a spousal rollover. The spousal rollover is treated as the surviving spouse’s IRA.
The surviving spouse may want to do a spousal rollover to take advantage of extending therequired beginning date. The required beginning date is the date when the surviving spouse must begin taking distributions. When distributions begin, income tax is imposed on the funds distributed.
If, after the death of an IRA owner, an IRA beneficiary does not qualify for or does not use the spousal rollover, the surviving spouse’s required minimum distributions will be based on the surviving spouse’s life expectancy. If there is a spousal rollover, the spousal rollover IRA is treated as if the surviving spouse funded it, i.e. as if the IRA was not funded with the deceased spouse’s funds. To do this, the surviving spouse may take required minimum distributions using the Uniform Lifetime Table. There is an exception to the foregoing. There is a special lifetime distribution table used if the surviving spouse was over ten years younger than the deceased spouse IRA owner.
By choosing the spousal rollover, the surviving spouse may designate her or his beneficiaries for the rollover IRA. This may provide the spousal rollover IRA a longer life if the surviving spouse names children, grandchildren or other younger family members or friends as beneficiaries. If the spousal rollover is not made, the surviving spouse may not designate other beneficiaries. If the rollover is not made, the IRA will have a shorter life.
In another post, we will discuss a possible issue if the surviving spouse is younger than age 59 ½ years. Using a spousal rollover in that situation may not be wise.
This article is for general information only and is not intended to provide legal or accounting advice. If you have questions or concerns about beneficiary designations for your IRA, please call us at 813-852-6500 for a free 30-minute consultation with an estate planning attorney.