Understanding Spousal Beneficiary IRA Inheritance: What Surviving Spouses Need to Know

When it comes to inheriting an IRA, a surviving spouse has unique and powerful options that are not available to other types of beneficiaries. Knowing how and when to make your decision can have lasting implications for your retirement, tax liability, and long-term financial flexibility.​

Spouses Only: Special Rules and Elections

These choices and strategies apply exclusively to surviving spouses. If you inherit an IRA from a spouse, you may elect to treat that IRA as your own, add it to your existing IRA, or keep it as an inherited account in your name. This special flexibility enables spouses to tailor their decisions to fit specific financial goals and life circumstances. Other heirs—such as children or siblings—must follow completely different rules and do not have this option.​

The One-Way Election: Choose Carefully

A spousal beneficiary may treat their inherited IRA as their own at any time. However, this is a one-way, permanent decision. If you start by maintaining the account as an inherited IRA, you retain the option to later elect it as your own. Once the IRA is treated as your own, the decision is irrevocable—you cannot revert back to the inherited status.​

Why Keep the IRA as Inherited?

There are several reasons a spouse might first keep an inherited IRA in the inherited status:

• If you are younger than 59 1/2, distributions from an inherited IRA are not subject to the early withdrawal penalty—providing flexibility for accessing funds if needed.​

• If you are older than your deceased spouse, keeping the account as inherited can allow you to delay Required Minimum Distributions (RMDs) until the deceased spouse would have reached RMD age, maximizing tax-deferral.​

When to Elect as Your Own

Eventually, it may be more advantageous for you to use your own RMD schedule. At that point, you can choose to treat the IRA as your own—locking in your election for all future withdrawals.​

Consult Before Electing

Deciding how to treat an inherited IRA as a spouse has long-term financial and tax implications. Each individual situation is different, and consulting a financial advisor can help ensure your decision best fits your retirement needs and tax strategy.​

Summary

Only spouses can choose to keep an inherited IRA in inherited status or make an irrevocable election to treat it as their own. This unique flexibility enables strategic planning—penalty-free access before age 59 1/2, or the ability to delay RMDs if appropriate. Because these decisions are permanent and complex, consulting with a knowledgeable advisor is recommended to maximize your benefits as a spousal IRA beneficiary.