Surviving Spouses Under Age 59 ½:

Typically, a surviving spouse under age 59 ½ will want to remain the beneficiary on the IRA so that withdrawals can be made without paying the 10% withdrawal penalty. Once the account is rolled over, withdrawals before the age of 59 ½ would result in a 10% federal income tax penalty.

Distributions are required by the later of the year the original IRA owner would have reached age 70 ½, or by December 31 of the year following the IRA owner's death. Required minimum distributions (RMDs) are calculated based on the single life expectancy table for beneficiaries, with the spouse recalculating his/her life expectancy every year by looking up the life expectancy factor on the table. Since this is based on a single life expectancy, RMDs will be larger than if the inherited IRA was treated as the surviving spouse's own IRA.

A surviving spouse can remain the beneficiary on the account until age 59 ½ to maintain the ability to take penalty-free distributions, and then roll the IRA into his/her own IRA after that age. By rolling the balance over, the surviving spouse will be able to withdraw smaller RMDs and name his/her own beneficiaries for the IRA.

Surviving Spouses Over Age 59 ½:

If the surviving spouse is at least age 59 ½, it typically makes sense to treat the inherited IRA as his/her own or roll it over into his/her own IRA. By doing so, the surviving spouse can name his/her own beneficiaries for the account. The surviving spouse must start taking RMDs at age 70 ½. RMDs are calculated using the uniform distribution table, which assumes a joint life expectancy with the beneficiary considered 10 years younger. When the surviving spouse dies, any remaining balance can be paid to the surviving spouse's beneficiaries over their life expectancies.

However, spouses who are significantly older than the deceased IRA owner can delay RMDs by remaining the beneficiary on the IRA. He/she would not have to take RMDs until the deceased spouse would have reached age 70 ½, even if the surviving spouse is already past age 70 ½.

Roth IRAs:

When a Roth IRA is involved, the surviving spouse would normally want to roll the Roth IRA over or treat it as his/her own. Then, no distributions would be required during his/her lifetime. If the surviving spouse remains the beneficiary, RMDs would be required by the later of the year the original IRA owner would have reached age 70 ½, or by December 31 of the year following the original IRA owner's death.