Benefits of Naming Spouse as Sole Beneficiary of Retirement Account
For instance, a surviving spouse who is named as the sole beneficiary of a retirement account is not required to withdraw the money right after the deceased spouse's death. This allows the surviving spouse to keep the tax deferred status of the money and not begin making withdrawals until the later of (1) the year the deceased spouse would have turned 70 1/2; or (2) December 31 of the year following the deceased spouse's death.
This rule applies only to the traditional IRA as the Roth IRA is not taxed when the money is withdrawn. This is not the case when a retirement account is left to a non-spouse. A non-spouse would be required to begin withdrawing the money in the year after you die.
"Roll Over" the IRA into the Surviving Spouse's Account
A surviving spouse who is named as the sole beneficiary of an IRA can choose to "roll over" the deceased spouse's IRA into his or her own IRA tax free. When the surviving spouse rolls the money into his or her IRA the surviving spouse is thereafter treated as having been the original owner. The surviving spouse then has the ability to name his or her own beneficiary to inherit the money and to use his or her own age and life expectancy to determine when distributions must be taken and in what amounts. The surviving spouse has the option of rolling the money over at any time after the death of the deceased spouse.
