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February 28, 2009

How does a spouse beneficiary elect to treat the inherited IRA assets as his/her ‘own’?

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How does a spouse beneficiary elect to treat the inherited IRA assets as his/her ‘own’?

How does a spouse beneficiary elect to treat the inherited IRA assets as his/her ‘own’?

The treat-as-own option , which applies only to a spouse who is the sole primary beneficiary, allows for the transfer of the inherited IRA balance to the surviving spouse’s ‘own’ non-inherited IRA. It also allows the surviving spouse to redesignate the decedent’s IRA to an IRA in his/her name in addition to effecting the removal of the decedent’s name from the account registration. The actual procedure is determined by the guidelines contained in the financial institution’s operational procedures. Alternatively, a surviving spouse is deemed to have made the election if, at any time, either of the following occurs —
  • Any amount in the IRA that would be required to be distributed under the beneficiary option is not distributed within the applicable deadline or
  • The spouse makes contributions to the IRA

The result of the treat-as-own option is that the IRA is treated as if it was established and funded by the spouse, instead of being inherited.
Notes:

  • If the inherited IRA is a SIMPLE IRA, it cannot be moved from under a SIMPLE until it had been at least two-years since the first contribution was deposited to the deceased participant’s SIMPLE IRA.
  • If the IRA is a Roth IRA, the IRA-agreement should be consulted to determine the options available to the spouse beneficiary. Some documents require the spouse beneficiary to treat the inherited Roth IRA as his/her own, i.e., the spouse does not have the option to treat the Roth IRA as an Inherited-Roth IRA

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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