Inheriting a spouse’s IRA gives you a few more options than otherwise. Read on to get an overview, click the links to read more details, and talk with your financial planner!
Spouse’s Choice
A surviving spouse may choose to make the inherited IRA their own. Only a spouse, and no other person, can make the decedent’s IRA their own IRA. Indeed, most surviving spouses choose to combine the IRAs if they have one. Or they choose to just make the decedent’s IRA their own if they do not already have an IRA. Less paperwork and less complexity, among other reasons, top the list for why this is the most common choice.
On the other hand, two types of surviving spouses may want to keep an inherited IRA.
A Young Spouse May Want a Spousal Inherited IRA
One big advantage for a younger spouse is that an inherited IRA enables them to access IRA money before they are age 59 ½. An IRA imposes a 10% tax penalty on distributions. Not in a spousal inherited IRA! A spousal inherited IRA does not impose a 10% tax penalty.
For important details, talk with your financial planner and read our other blogpost What Happens when I Inherit My Spouse’s IRA.
A Spouse Much Older than the Decedent May Want a Spousal Inherited IRA
One advantage for a spouse who is older than the decedent spouse is they may continue tax deferral on the inherited IRA longer than if it was their own IRA.
Inherited IRAs use the decedent’s age for an annual required distribution. A spouse, and only a spouse, who keeps an inherited IRA may defer until the decedent would have reached the age when they would have been forced to make distributions. With large differences in ages between spouses, this is an opportunity to discuss with your financial planner.
For important details, talk with your financial planner and read our other blogpost What Happens when I Inherit My Spouse’s IRA.
Similar information:
- IRAs: Roth, Rollover, Inherited and More
- Which IRA to Choose? Traditional vs Roth IRA – Differences & Which is Better Explained
- SECURE Act and How it Affects Retirees
* IRA stands for individual retirement account. An IRA provides tax advantaged retirement savings.
The tax information contained in this article is general in nature. Always consult an attorney or tax professional regarding your specific legal or tax situation.