by Kristin P. Sinclair – A Accu Tax – January 18, 2018
If you or your spouse should die, then the survivor generally has several options for the Inherited IRA:
A.) Spousal survivors can designate themselves as the IRA owner, and then the survivors may elect to treat the Inherited IRA as their own Traditional IRA.
B.) Treat the Inherited IRA as their own by rolling it over into: their Qualified Employer Plan (such as a 401k plan); their Qualified Employee Annuity Plan (403a plan); their Tax-Sheltered Annuity Plan (403b plan); or their state or local government Deferred Compensation 457 plan.
C.) The surviving spouse may also elect to treat themselves as the IRA Beneficiary, rather than treating the Traditional IRA as their own IRA.
Please note that surviving spouses designated as the sole beneficiary, and who have an unlimited right to withdraw funds, will also be considered to have treated an Inherited IRA as their own Traditional IRA if: they do not take the Traditional IRA required minimum distribution (RMD) for a year; or make contributions to the Inherited IRA. Such contributions also include Traditional IRA Rollover Contributions into the Inherited IRA.
Aaron inherited his wife Louise’s 401k plan. Louise’s former Charlotte NC employer sent Aaron the forms to treat this as his own Traditional IRA. Aaron intends to ask his Rock Hill SC tax advisor if he should do an IRA Rollover and treat the 401(k) as his own Traditional IRA. If so, then Aaron may roll the 401k into his Mutual Fund IRA.
Kristin P. Sinclair: A Accu Tax
Updated in Charlotte NC and Rock Hill SC
January 18, 2018 (803)329-0609
KPS: More information is available at IRS.gov
See Publication 590-A and Publication 590-B.