Spousal Beneficiaries and the 10-Year Rule: Today’s Slott Report Mailbag

Thursday, January 02, 2025

By Sarah Brenner, JD
Director of Retirement Education

Question:

Hello,

Our daughter (age 50) is the sole beneficiary of her husband’s (age 52) IRA due to his death in April 2024. Is there a time limit for when she must either take ownership or roll it over into her own IRA or other qualified plan?

Thank you,

Marylou Pagano

Answer:

Hi MaryLou,

Our condolences on the death of your son-in-law.

Your daughter as a spouse beneficiary has some options. She may consider keeping the IRA as an inherited IRA. If she does a spousal rollover into her own IRA and then needs to take a distribution, she will be subject to the 10% early distribution penalty because she is under age 59½. By delaying a spousal rollover and keeping the account as an inherited IRA, she would avoid this penalty because it does not apply to inherited accounts.

No distributions would be required from the inherited IRA until the year that the deceased IRA owner would have been age 73. She can still do a spousal rollover into her own IRA at any time. There is no time limit or deadline for this.

Question:

I have an 87-year-old mother who passed away after her required beginning date with three children as beneficiaries. They are each subject to the 10-year rule. Are the annual required minimum distributions (RMDs) based on the beneficiaries’ life expectancies or are they based on the original owner (87-year-old mother’s) life expectancy?

Thank you,

Janine

Answer:

Hi Janine,

You are correct that the beneficiaries in this case would be subject to the 10-year rule and would have to take annual RMDs during the 10-year period. Those annual RMDs would be based on the beneficiaries’ single life expectancies.

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