Spousal IRA Inherited

An inherited spousal IRA is one where the beneficiary of the inherited IRA is the spouse of the deceased. Although a beneficiary of an inherited IRA can be anyone, not necessary a spouse, an inherited spousal IRA is common. Many IRA owners names their spouse as the primary beneficiary of their IRA then their children as the secondary multiple IRA beneficiaries.

Withdrawl of inherited IRA penalty free

If a spousal IRA is inherited, distributions or withdrawl of the inherited IRA are not subject to the 10% premature IRA withdrawl penalty. This is true even if the spousal IRA beneficiary has not turned 59½ years old. Although the withdrawl of spousal inherited IRA is penalty free, the spousal beneficiary may have to pay ordinary income taxes.

Should I rename inherited IRA from my spouse?

If the spousal IRA inherited is still under the deceased IRA owner's name and the beneficiary is under age 59½, the spouse who inherited the IRA may not want to rename the inherited IRA. This is important especially if the spouse will need distributions from the spousal inherited IRA before age 59½. By keeping the assets in a beneficiary IRA, any distribution may be subject to income tax but not the 10% penalty. Once the spouse who inherited the IRA reaches 59½, the spousal inherited IRA can be rolled into the survivor's IRA. This inherited IRA rollover allows the surviving spouse to rollover the IRA and then take a distribution before age 59½. This way, the 10% penalty tax would not be imposed.