Wife Rolls Over Deceased Spouse IRA
If a spouse beneficiary rolls over her deceased husband’s Qualified ROTH IRA to treat it as her own, must the spouse maintain that IRA as a rollover IRA in her name separate from her own previously owned Qualified ROTH IRA invested in the exact same stock/mutual fund or can she merge the former husband’s IRA into her own, thereby having one Qualified ROTH IRA? If she cannot do so, how is the rollover IRA titled?
HB
Permalink Submitted by Peter Lingane on Wed, 2011-11-30 03:35
The assumed Roth IRA is identical to an IRA originally opened by the surviving spouse. She can combine it with her other Roth IRAs or keep it separate as she chooses.
Permalink Submitted by Alan Spross on Wed, 2011-11-30 03:37
A surviving spouse can combine an inherited Roth IRA for which ownership has been assumed with their own Roth IRA. Once the surviving spouse assumes ownership, they are treated in all respects as if they always owned that Roth IRA, ie the same treatment as their own Roth IRA.
What this means is that the 5 year holding requirement for both IRAs (or one if combined) is the longest of their own Roth or the Roth the deceased spouse established. The surviving spouse’s age is used to determine when both Roths are qualified at age 59.5.
Some Roth agreements automatically make a sole spouse beneficiary the owner. There are very limited situations under which the surviving spouse would NOT choose to be the owner. One such situation might occur when the surviving spouse needs distributions from a non qualified inherited Roth. If there are large amounts of earnings in the inherited Roth and not much left in contributions, the surviving spouse might want to keep the Roth in inherited form so that the earnings would not be penalized (death benefits), although they would still be taxable. Conversions under 5 years could also be distributed without penalty in this situation. But these are rare. In most cases, assuming ownership will be the best choice.
Note: If ownership is not assumed or the Roth rolled over, the RMD rules for the inherited Roth are the same as for a TIRA. RMDs do not have to begin until the year the deceased spouse would have reached 70.5.