When a spouse inherits an IRA, the rules and options available differ significantly from other beneficiaries. In this article—the first installment of our “Inherited IRA Series”—we’ll focus on cases where the surviving spouse is the sole beneficiary of the IRA.
Why IRA Inheritance Rules Have Become Confusing
Recent changes under the SECURE Act and its successor, SECURE Act 2.0, have made IRA rules increasingly complex. The IRS has even temporarily waived penalties in light of the confusion—but starting in 2025, enforcement will resume.
For surviving spouses inheriting an IRA, understanding the available options and associated tax consequences is critical. Let’s walk through the basics and each of the three main options available to a surviving spouse.
The Importance of RMD and the Required Beginning Date (RBD)
IRA inheritance rules vary depending on whether the original account holder had reached the Required Beginning Date (RBD)—the age at which Required Minimum Distributions (RMDs) must begin.
What is an RMD?
An RMD is the minimum amount that must be withdrawn annually from tax-deferred retirement accounts such as traditional IRAs. The government mandates RMDs to end tax deferral and begin collecting taxes once the account holder reaches a certain age.
RMD Starting Age (as revised by SECURE Acts):
| Birth Year | RMD Starting Age |
| Before 1951 | 72 |
| 1951–1959 | 73 |
| 1960 or later | 75 (starting 2033) |
Note: The first RMD can be delayed until April 1 of the following year, but this will result in two RMDs in that year—potentially increasing taxable income.
How to Calculate RMD
RMDs are calculated by dividing the previous year-end account balance by a distribution period number from the IRS Uniform Lifetime Table. For spouses more than 10 years younger, the Joint Life Expectancy Table applies instead.
Three Options for a Spouse Inheriting an IRA
If a surviving spouse is the sole designated beneficiary, they have three main options:
1. Take a Lump-Sum Distribution
This is the simplest method: withdraw the entire IRA in cash.
Pros: Immediate access and flexibility in using the funds.
Cons: The entire distribution is treated as taxable income in the year received.
If the deceased had already reached their RBD, the final RMD must still be withdrawn in the year of death.
2. Roll Over the IRA Into Your Own IRA
Spouses can roll over the inherited IRA into their own IRA.
Pros: The account is treated as the spouse’s own. RMDs follow the surviving spouse’s age and schedule.
Cons: If the spouse is under 59½, early withdrawals are subject to a 10% penalty.
This option provides full control and simplicity—ideal for spouses over 59½ not needing immediate access.
3. Establish an Inherited IRA
This involves transferring assets into a newly titled Inherited IRA account, naming both the deceased and the surviving spouse as beneficiary.
Pros: No early withdrawal penalty, even if under age 59½. Flexible withdrawals.
Cons: RMDs are still required, based on the surviving spouse’s age and whether the deceased had reached RBD.
Example Scenarios:
- If the deceased had not reached RBD:
- The surviving spouse starts RMDs in the year the deceased would have turned RMD age, using the spouse’s own age to calculate the RMD.
- If the deceased had reached RBD:
- The year-of-death RMD must be taken by year-end. From the following year, RMDs are based on the spouse’s age.
Tax Considerations and Penalties
All RMD withdrawals are subject to ordinary income tax.
If RMDs are missed, penalties of 10–25% may apply—though exceptions can be granted for reasonable cause.
Choosing the right method can optimize tax efficiency and avoid unnecessary penalties.
Special Notes for Employer-Sponsored Plans and Roth IRAs
Employer Plans (e.g., 401(k), 403(b))
Although similar rules generally apply, employer plans may have unique policies, such as requiring beneficiaries to complete paperwork within 6 months of death. Always confirm with the plan administrator.
Roth IRAs
Normally, Roth IRAs are not subject to RMDs during the original owner’s lifetime.
But Inherited Roth IRAs are subject to RMD rules, and may also be subject to the 5-year rule for penalty-free withdrawals.
Final Thoughts: Be Proactive and Stay Informed
We understand that dealing with finances after the loss of a loved one can be emotionally and mentally overwhelming. Fortunately, there’s no immediate deadline for making inheritance decisions, and financial institutions (custodians) are often helpful in guiding you through RMD and distribution requirements.
✅ Action Step: Check Your IRA Beneficiary Designations
Make sure your retirement accounts have up-to-date beneficiary designations. If left blank, your estate may be subject to probate—a costly and time-consuming legal process. By designating beneficiaries, you can avoid probate and ensure a smoother asset transfer.
Coming Up Next: What If the Beneficiary Is Not a Spouse?
In the next part of our Inherited IRA series, we’ll explore how the rules differ when the IRA is inherited by a non-spouse beneficiary. The differences are substantial, so be sure to check it out.
If you’d like to consult on retirement planning, IRA strategies, or inheritance issues, feel free to contact us at Info@kamitanifs.com