Spousal Rollovers
The new regulations clarify — and, in at least one instance, restrict — a surviving spouse's ability to elect to treat an IRA inherited from the deceased spouse as the survivor's own IRA. The purpose of the election is to postpone having to take required minimum distributions from the inherited IRA until the time that the surviving spouse would have to take RMDs from her/his own IRA (which may be several years later).

A surviving spouse may elect to treat her/his entire interest as a beneficiary in the decedent's IRA as her/his own IRA only if the survivor is the sole beneficiary of the IRA and has an unlimited right to withdraw from the account. One way to make the election is to rename the IRA with the surviving spouse as the owner. The election can be made any time after the IRA owner's date of death.

Example: Maria dies leaving her husband, Martin, as her sole IRA beneficiary. Martin may elect to treat Maria's IRA as his own by having the IRA pay out to him any RMD payable to Maria in the year of death. The IRA trustee can rename the account in Martin's name as the owner of the IRA.

One downside to the new regulations is a rule clarifying that, if a trust is named as the beneficiary of the IRA, the surviving spouse may not make the election to treat the IRA as her/his own — even where the surviving spouse is named the sole beneficiary of the trust. If you are an IRA owner who has this type of arrangement in place, an immediate review of your estate plan is essential.

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