What Are the Options For a Spousal Inherited IRA?

In these articles we’ve discussed inherited IRAs and how to handle them – but we have not covered all of the options for a Spousal Inherited IRA separately.  There are some differences, specifically more options available, so this is an important topic.  It should be noted that the majority of this article applies to inheriting IRAs or Qualified Retirement Plans (QRPs, such as a 401(k) or 403(b)), although the term IRA is used throughout.  The receiving account must always be an IRA, though.

As a person who has inherited an IRA from your spouse, you have the following options if you are the sole beneficiary of the IRA:

  • Leave the IRA where it is, and begin taking distributions based upon your own life (see Table I for the factors).  This is the default position.
  • Rollover the IRA to an inherited IRA (see this post for more information).  In this case, you’re treating the situation as if you’re a non-spouse beneficiary.
  • Rollover the IRA into an existing or new IRA in your own name.  This is the special provision that spouses can use that a non-spouse beneficiary can not.  (Note:  you could also leave the IRA where it is and just begin treating the account as if it was your own – more on this below.)

Rollover Into Your Own IRA

There’s nothing terribly complex about the mechanics of a spousal rollover of an inherited IRA – you simply put in motion the paperwork for a rollover, making sure that both the original custodian and the new custodian are aware of the fact that you’re taking advantage of this special provision for spouses.  It is also possible to leave the IRA in place where it is and treat the IRA as your own – this will become the default if you 1) make a contribution into the account; or 2) fail to take the RMDs as if the account were inherited.

Now you have the IRA funds in your own account – which you can contribute to, convert to a Roth IRA, or whatever you’d like.  Plus, if you’re under age 70½, you don’t have to start Required Minimum Distributions (RMDs) from the account. This brings up the one possible downside that you should be aware of as well, prompting a word of caution…

A word of caution

IF you go ahead and rollover the IRA from your deceased spouse’s account into an account in your own name, if you’re less than age 59½, you do not have free access to the funds in the account – one of the 72(t) exceptions must apply, or you’d be charged the extra 10% penalty in addition to taxes on the withdrawal.  It is for this reason that many inheriting spouses do not take the IRA on as their own account – especially when there is a need to access the funds for income.

One more provision

As mentioned earlier, the provision for the spousal beneficiary to treat the IRA as her own is generally for a spouse that is the sole beneficiary.  There are two ways to resolve this situation if the spouse would like to rollover the account to her own IRA and there are more than one beneficiary.

  1. Other beneficiaries could disclaim the inheritance, leaving only the spouse (see this article for more information).  Many times, a well-intentioned IRA owner will designate her spouse and a child or grandchild (or a trust for the whole mob of children and/or grandchildren) as split beneficiaries of an IRA account.  This can bring about unintended results, such as very young children having to take RMDs that they do not need.  By disclaiming the inheritance and leaving only the spouse, the spouse can set up a new IRA in her own name, with the same original, now disclaimed, beneficiary or class of beneficiaries as the beneficiary(s) of the new account. This will fulfill the original owner’s intent, while opening up the account to the extra privileges available to an owner of an IRA versus an inheritant.
  2. A somewhat less messy method is available – as a spousal beneficiary, but not the sole beneficiary, you can take a distribution of your entire share from the account, and then roll it over to an IRA in your own name, as long as it’s within the 60-day period following the distribution.  You may need to make up the difference of the withholding – in general a distribution from an IRA will be subject to 20% withholding.  If you don’t roll over the full amount into your own IRA, you will be taxed and perhaps assessed a 10% penalty on the amount that you did not roll into the new account.  Using this method eliminates the disclaimer requirement which might be necessary if there are many other beneficiaries or if the other beneficiaries do not wish to disclaim.  (Note:  This method is STRICTLY for a spousal beneficiary.  A non-spouse beneficiary will bust the stretch IRA by taking a distribution of this type, even if they rollover the amount into a properly-titled account within the time allotted.  Those rollovers should ONLY be done via trustee-to-trustee transfer.)

About the author

Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

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  • If a spouse rolled her deceased husband’s IRA to an “Inherited IRA” at his death 2 years ago instead of having it put in her name can she do so now? In effect roll the Inherited IRA into her own IRA? Both spouses were the same age and both were over 70 1/2 when the husband died. She is interested in consolidating the two accounts for simplistic reasons.


  • Husband dies at age 65. Wife age is 40. Can IRA be left in husband’s name, title changed to “deceased name” for the benefit of “wife’s name” with no minimum / maximum withdrawals required and also no penalties for early withdrawals?

    • A surviving spouse has the option of treating the IRA as his or her own, but the age limit will apply and distributions before age 59 1/2 will be subject to penalty.

      A surviving spouse could also treat the IRA as inherited, but minimum distributions will apply, however no penalty would apply.

      • RMDs on spouse inherited IRAs don’t begin until the owner would have turned age70. in the above case, that’s 5 years from now, so survivor could leave in inherited status for those 5 years, take distributions without 10% penalty and then roll to own IRA as spouse, avoid RMDs but bring back the penalty on any distributions taken.

  • Husband died Nov 2012, was over the age of 70 1/2 and took the RMD during 2012 for his IRA. Wife, also over 70 1/2, was sole beneficiary and inherited the IRA as spousal continuation in 2013. Wife did nothing to the account, did not take a RMD from it. Wife rolled the IRA to her own IRA in June 2014, and took a RMD from this IRA in 2014 using her current age.

    Should she have taken a RMD on the inherited IRA during 2013?

  • Wife died in 2013 leaving IRA to her spouse who is sole beneficiary. Wife was under 70 1/2 when she died. Husband will be 70 1/2 in 2015. IRA has husband”s name on it designated as FBO, presumably denoting For the Benefit Of.

    Questions are:

    Can husband use his age for RMD purposes? Can he transfer this to his own IRA now? For purposes of the RMD, can he aggregate this with his own to determine annual RMD’s or will he need to take distributions from this account if he can’t transfer or combine with his own?


  • Hello Jim,

    I really appreciate your prompt reply. Your concise information was exactly what I was looking for. Thanks again.

  • Hanneli,

    The way your IRA is currently set up, at your passing your husband, being the primary beneficiary, has a choice to either leave the IRA in your name and draw from it (when eligible), or to rollover the IRA into an account in his own name. If he does the second, he will be able to designate anyone he wishes as the primary beneficiary of that account. If he leaves the account in your name, at his passing the account would revert to the secondary beneficiaries that you’ve designated.

    In the current setup you have no control over how he handles this. If you changed your IRA beneficiary to a trust, you could control how the funds from the IRA are ultimately distributed. This will require an attorney’s assistance to set up the trust as you wish.

    Hope this helps –


  • Hello Jim,
    My traditional IRA beneficiary form names my husband as the primary beneficiary and our two sons as secondary beneficiaries. For the purpose of rolling my IRA into his would my husband be considered a sole beneficiary since our sons would only become beneficiaries if my husband were not living at the time of my death or would he have to treat my IRA as an inherited IRA?

    Looking forward to your response.
    Thanks. Hanneli

  • Hello, Mary –

    The primary benefit of leaving the IRA in his name at this point is that you can get at the funds without penalty. Since you’re under age 59.5, if you retitled the account to your name you would be subjecting yourself to a 10% penalty for early withdrawal.

    There’s no law that says you can’t take out more than the minimum distribution requirements – if you need more, you should take more (but plan for the future).

    Once you reach age 59.5 you could re-title the account in your name and name new beneficiaries, and continue to withdraw funds without penalty.

    Hope this helps –


  • Hello,
    My husband passed away last year at the age of 85, I am 58. I am the sole beneficiary of his IRA annuity. I will be using the money in the IRA as my sole source of income. The RMD will not provide me enough funds to live on. I will also need to name new beneficiaries. What are the advantages of leaving it in his name or to retitle it to my name?

  • Hi, Sue –

    The primary advantage to leaving the IRA in the name of the decedent spouse (i.e., treating it as an inherited IRA) is that if the surviving spouse is younger than age 59½, the inherited IRA provides for taking distributions without penalty. If the IRA is rolled over to an IRA in the name of the surviving spouse under age 59½, then regular distribution rules apply (10% penalty applies unless another exception is utilized). One particular downside to leaving the IRA as an inherited IRA is that RMDs are required from the account, regardless of the age of the beneficiary. (It should be noted that if RMDs are not taken from the spousal-inherited IRA or contributions are made, the IRS assumes that the IRA is being treated as your own, which is the same as rolling it over to a new account in your own name.)

    The advantage of rolling over the inherited IRA to the name of the surviving spouse is that the surviving spouse can then name his or her own choices for beneficiaries; plus he or she can make contributions to the account from earnings. Lastly, by rolling over the inherited IRA to an IRA in the name of the surviving spouse, the surviving spouse has the option to convert the IRA (or a portion) to a Roth IRA.

    Hope this helps!


  • Hello, If the spousal beneficiary is the same age as the original owner, are there any differences in the RMD or anything else between the choices of rolling the IRA over into a new IRA in the spouse’s name or leaving it where it is and taking distributions based on the spouse’s life? Any advantages to one over the other?

  • Hi, Joanne –

    Yes, the distributions from the IRA (or 401(k)) maintain the same taxation privilege when inherited. That is to say, if distributions would have been taxable during the life of the original owner, distributions will be taxable to the beneficiary as well. This is true for spousal beneficiaries and non-spousal beneficiaries.

    As an inherited IRA the distributions from the account are not subject to the 10% penalty, regardless of the age of the beneficiary… But if the account is rolled over or re-titled in the name of the spousal beneficiary, unless the spousal beneficiary is older than age 59 1/2 or one of the other exceptions applies, the 10% penalty will apply to distributions.

    Hope this helps!


  • Hello, I’ve read your Options for a Spousal Inherited IRA. Here is my question.
    If the surviving spouse (only beneficiary) rolls over the IRA (401k) into her own IRA, and makes no more contributions, are the original contributions by the deceased going to be taxable when the IRA is distributed? I realize they would have been taxable to the original owner, since they were pre-tax dollars taken out of his paychecks, but would the surviving spouse have to pay income tax on those dollars in the end?
    Thanks for your advice,
    Joanne Shuemaker

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