SPOUSAL ROLLOVERS

Wednesday, June 07, 2023

By Sarah Brenner, JD
Director of Retirement Education
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Probably the biggest advantage that a spouse beneficiary of an IRA has over other
beneficiaries is the ability to do a spousal rollover. Only a spouse beneficiary can do a
spousal rollover. Nonspouse beneficiaries do not have this option. With a spousal
rollover, inherited retirement account funds become the spouse beneficiary’s own.

How a Spousal Rollover Is Done

A spousal rollover can be done by rollover, direct transfer or by the spouse beneficiary
treating the inherited IRA account as her own. All three of these methods will achieve
the same end result of a spousal rollover.

A direct transfer of the inherited assets is the safest way to get a spousal rollover done.
It avoids the rules and potential pitfalls that come with a 60-day rollover. If the deceased
spouse died on or after his required beginning date (RBD), the year-of-death RMD must
be taken before a 60-day (spousal) rollover is permitted. But, an RMD can be directly
transferred to another inherited IRA and taken later in the year.

Example: Jake, age 75, dies in 2023 without taking his RMD. His spouse, Gwen, age
68, is his beneficiary. Gwen decides to do a spousal rollover and she transfers the
inherited IRA to a new IRA in her own name. She can transfer Jake’s entire IRA,
including the year-of-death RMD, to the new IRA and take the year-of-death RMD later
in the year. In 2024, Gwen will not need to take an RMD from the new IRA because it is
considered her own IRA and she is not yet 73.

When a spouse beneficiary treats an inherited account as her own, the surviving spouse
essentially pretends as if she owned the deceased spouse’s IRA account all along. This
method of doing a spousal rollover is relatively uncommon as many custodians do not
allow this option.

Consider a Spousal Rollover Carefully

While a spousal rollover is a powerful strategy, it should be considered carefully. This

election is irrevocable. Once the funds are in spouse’s own IRA, a 10% early distribution
penalty will apply if the spouse is under age 59 ½ when distributions are taken. There is
no going back to an inherited IRA.

A young spouse beneficiary should consider whether he will need the funds in the
inherited IRA. If so, leaving the account as an inherited IRA may be the better choice.
There is no deadline for a spousal rollover, so there is nothing that prevents it from
being done later on when the spouse beneficiary reaches age 59 ½.

These rules can be confusing, and mistakes can be expensive. Spouse beneficiaries
with questions about the right move should speak with a tax advisor who is
knowledgeable about these rules. To find an advisor near you, go
to https://www.irahelp.com/find-an-advisor