My client is a 52 year old female. Her 55 year old husband passed away in late August with a 401k naming his spouse as the sole beneficiary.

My understanding is that my client can:

1) Roll the 401k into her own IRA
2) Use the 5-year rule

or, because she was the spouse and sole beneficiary she can

3) Be named as the designated beneficiary of a IRA Roll Over

The benefit of electing #3 is that she is not required to take distributions until her husband would have been 70 1/2, and, she is able to take distributions prior to 59 1/2 without incurring the 10% IRS penalty.

Is my understanding of #3 correct? Please advise.