Spousal Decedent IRA
My client’s husband died at age 54 just a little over 5 years ago. Since she was only age 55 at the time of his death, we decided to keep his Traditional IRA as a “decedent IRA” instead of rolling it over into her own IRA since we wanted the flexibility to take withdrawals, if needed, without a pre 59.5 penalty. She is now age 60 and plans to retire June 15, 2011. She likes the idea of guaranteed retirement income and likes the living riders available on variable annuities. Unfortunately, I know of only one company that will allow a spousal beneficiary guaranteed retirement income. It obviously would be easier to roll the “decedent IRA” to a Traditional IRA for herself, but I’ve been told that is not possible; once a “decedent IRA”, always a “decedent IRA”. Can anyone confirm or deny this or provide any other suggestions?
Thank you for your time and expertise.
Permalink Submitted by Alan Spross on Thu, 2011-02-10 19:49
What you were told is incorrect. A surviving spouse can assume ownership or roll over the IRA to her own anytime she wishes. There is no deadline.
Since she is now over 59.5, there is only one very minor benefit in continuing inherited status. Since she is one year older than her husband and would not have to take an RMD as beneficiary until the year her husband would have reached 70.5, she could delay her first RMD by one year by continuing as beneficiary. But that year is another decade away and since the extension is only for one year, this factor is very minor, but you probably should disclose it to her nonetheless. Sounds like she will be needing funds from the IRA well before that year anyway.