Surviving Spouse as Designated Beneficiary – RMD Delay

Take-Away: A surviving spouse who is named as the designated beneficiary of their deceased spouse’s IRA has options to choose from when taking required minimum distributions.

Background: Often overlooked is the option of a surviving spouse who is designated as the beneficiary of their deceased spouse’s IRA to delay taking required minimum distributions (RMDs.)

1. Eligible Designated Beneficiary: One option is for the surviving spouse who is named as the designated beneficiary is to start taking required minimum distributions (RMDs) using his/her own life expectancy, thus stretching distributions over possibly a long period of time. The surviving spouse is an eligible designated beneficiary, thus the survivor may take annual distributions over their lifetime; the surviving spouse is not subject to the SECURE Act’s 10-year distribution mandate.
2. Rollover: Most familiar is the survivor’s option to treat the deceased spouse’s IRA (or retirement account) as his/her own IRA through a spousal rollover. Thus,  the surviving spouse rolls over the deceased spouse’s IRA balance into his/her own IRA (established in the survivor’s own name), and thus delays taking distributions until the surviving spouse reaches their own required beginning date (RBD) of age 72.
3. Delay Taking RMD: Yet another option is for the survivor to delay the commencement of taking distributions from the inherited IRA if the surviving spouse is (i) the sole beneficiary and (ii)the deceased IRA owner- spouse did not begin taking distributions during their lifetime, i.e. the decedent had not yet reached his/her required beginning date (RBD) of age 72. In this situation, the surviving spouse is permitted to delay taking distributions from the inherited IRA until the end of the calendar year in which the deceased IRA owner-spouse would have attained the age of 72.

   (A)  Surviving Spouse’s Death: If the surviving spouse dies prior to the RBD, the applicable distribution rules (5-year, 10-year, or stretch) are to be applied as if the surviving spouse was the IRA owner. For this purpose, the date of death of the surviving spouse is substituted for that of the deceased IRA account owner.

  (B)  Surviving Spouse’s Remarriage: If the surviving spouse remarries and dies prior to the commencement of distributions from the inherited IRA, the surviving spouse’s new spouse cannot utilize the delayed distribution exception, the new spouse would only be a successor beneficiary.

Conclusion: A surviving spouse who is the designated beneficiary of their deceased spouse’s IRA has options most other designated beneficiaries do not have. A surviving spouse can still roll an IRA made payable solely to him/her into a rollover IRA. Under the SECURE Act’s Proposed Regulations the surviving spouse can use the life expectancy of their deceased spouse if the deceased spouse was younger than the surviving spouse to calculate RMDs.