This video describes the options that Spouses have when inheriting a retirement account from their deceased spouse.

00:00 – Intro
00:35 – Beneficiary Types Overview
02:40 – Before RBD Options
06:33 – After RBD Options
08:07 – Calls to Action
08:33 – Pre-2020 Rules

IRS Website Explainer –

Journal of Accountancy –

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Losing a spouse is a devastating event, and the passing of a loved one can bring about many financial challenges, including the management of an inherited Individual retirement account (IRA). When a spouse passes away and leaves behind an IRA, the surviving spouse has several options to consider in order to make the most of the inherited funds.

One of the first options for a surviving spouse is to simply transfer the IRA into their own name. This allows the spouse to treat the inherited IRA as if it were their own, and they can continue to make contributions, take distributions, and name their own beneficiaries. This option can be beneficial if the surviving spouse is not yet retired and wants to continue to grow the assets in the IRA for their own retirement.

Another option for a surviving spouse is to roll over the inherited IRA into a new, separate IRA. This allows the spouse to maintain the tax-deferred status of the inherited funds and avoid having to take required minimum distributions (RMDs) based on the original owner’s age. This can be a good option for spouses who are not in need of the funds right away and want to let them continue to grow tax-deferred.

A third option for a surviving spouse is to take distributions from the inherited IRA over a period of time. This option allows the spouse to access the funds as needed, while still taking advantage of the tax-deferred growth of the assets. The IRS offers several distribution options for inherited IRAs, including taking distributions based on the original owner’s life expectancy or taking distributions over a five-year period. It’s important for the surviving spouse to carefully consider their financial needs and goals when choosing a distribution strategy.

One important thing to note is that if the surviving spouse is under the age of 59 ½, they may be subject to a 10% early withdrawal penalty if they choose to take distributions from the inherited IRA. However, there are exceptions to the penalty, such as using the funds for certain medical expenses or to purchase a first home.

In conclusion, for a surviving spouse who has inherited an IRA, there are several options to consider in order to make the most of the funds left behind by their loved one. It’s important for the surviving spouse to carefully evaluate their financial situation and goals, as well as consult with a financial advisor or tax professional, to determine the best course of action for managing the inherited IRA. By choosing the right option, a surviving spouse can help ensure that they make the most of the assets left behind by their spouse and secure their own financial future.