The Spousal Rollover Process for an Inherited IRA

Inheriting a retirement account from a spouse introduces a unique set of financial considerations. Federal tax law provides surviving spouses with options unavailable to other beneficiaries, allowing for distinct strategies in managing these assets. The choices made can significantly influence how the funds grow and when they must be withdrawn. Understanding these specific spousal rules is the first step in navigating the post-inheritance financial landscape.

Available Spousal Options

A surviving spouse has two primary pathways for an inherited IRA: executing a spousal rollover or maintaining it as an inherited IRA. The spousal rollover is a choice unique to surviving spouses that involves moving the assets from the deceased’s IRA into a new or existing IRA in the survivor’s name. Once complete, the account is subject to standard IRA rules based on the surviving spouse’s age and circumstances.

Required Minimum Distributions (RMDs) will be determined by the surviving spouse’s age. If the surviving spouse has not yet reached the RMD age of 73, they can delay distributions until reaching that age, allowing the funds to grow tax-deferred. The rollover allows the survivor to reset the RMD clock based on their own life expectancy, calculated using the IRS’s Uniform Lifetime Table.

A consideration with the spousal rollover is the 10% early withdrawal penalty. If the surviving spouse is under age 59½, withdrawals from the rolled-over IRA will be subject to this penalty. This makes the rollover a less flexible option for a younger spouse who may need to access the funds before that age. This option is best for those who do not need immediate access to the money and want to maximize tax-deferred growth.

The second option is to treat the account as an inherited IRA. This involves retitling the account to show the surviving spouse as the beneficiary, for instance, “John Doe IRA (Deceased Jane Doe), for the benefit of John Doe.” The benefit is that withdrawals from an inherited IRA are exempt from the 10% early withdrawal penalty, regardless of the surviving spouse’s age. This makes it a compelling choice for a survivor under age 59½ who anticipates needing the funds.

With an inherited IRA, RMD rules are based on the deceased spouse’s age. If the deceased had started taking RMDs, the survivor must continue them but can calculate the amount based on their own single life expectancy. If the deceased had not reached RMD age, the survivor can delay distributions until the year the deceased would have turned 73. A spouse who chooses the inherited IRA option can later roll the assets into their own IRA, a decision often made after passing age 59½.

Required Information and Documentation

Before initiating any transfer or rollover, a surviving spouse must gather specific documents for the financial institution. A certified copy of the death certificate is required, as financial institutions will not process any beneficiary claims without it. You will also need:

• A recent account statement for the deceased’s IRA, which provides the account number.
• The deceased’s full legal name, Social Security number, and date of death.
• The surviving spouse’s full name, Social Security number, date of birth, and contact information.
• The account number for an existing IRA if you are rolling the assets into it.

This information is used to complete the institution-specific forms that govern the transaction. These forms, which can be obtained from the institution’s website, will guide you to select whether you are performing a spousal rollover or establishing an inherited IRA. Reviewing the completed paperwork for accuracy before submission is important to prevent delays.

The Rollover Process

After the forms are accurately completed, submit the application package to the financial institution. Most institutions offer multiple submission methods, including mail and a secure online portal. If you mail the physical documents, it is advisable to use a trackable method like certified mail.

After submission, the financial institution will begin its internal review and processing. This period typically lasts between five and ten business days, though it can vary depending on the institution’s workload. During this time, the firm verifies the documentation and prepares to transfer the assets as instructed. You should expect to receive a confirmation of receipt from the institution after you submit the paperwork.

Upon successful completion, the assets will be moved from the deceased’s IRA to the designated account. If you executed a spousal rollover, the inherited assets will appear in the destination IRA. If you established an inherited IRA, you will see a new account in your portfolio. The institution will send a final confirmation statement showing the transaction is complete.