Spousal IRA Rollovers For Same-Sex Couples
By Joe Cicchinelli, IRA Technical Expert
Follow Me on Twitter: @JoeCiccEdSlott
Previously, same sex married couples did not have the spousal IRA benefits of opposite-sex married couples under the tax code. These benefits include the ability to make spousal IRA contributions, tax-free splitting of IRAs in a divorce, and spousal rollovers at death. However, the IRS recently issued guidance that gives same-sex married couples the spousal IRA benefits.
Under IRS Revenue Ruling 2013-17, same-sex marriages performed in a state that recognizes that marriage will be recognized for federal tax purposes. In essence, the IRS has adopted a “state of celebration” rule. The state where the couple currently lives doesn’t matter. For example, a same-sex couple who were married in Maryland (which allows same-sex marriages) but live in Pennsylvania (which doesn’t allow same-sex marriages), is treated as legally married for federal tax purposes. The effective date of IRS Revenue Ruling 2013-17 is September 16, 2013.
Note: the IRS ruling said that same-sex couples in civil unions and domestic partnerships won’t be treated as “married” for federal tax purposes.
In addition to general tax implications such as filing a joint federal income tax return, the IRS ruling has ramifications for IRAs. Specifically, the spousal IRA benefits are now available for same-sex married couples.
With respect to IRAs, perhaps the biggest benefit for same-sex married couples is the option to do a spousal rollover at death. Under the tax code, when an IRA owner dies, the only beneficiary who can make the IRA his or her own IRA via a rollover or transfer (often called a “spousal IRA rollover”) is a surviving spouse beneficiary.
When a surviving spouse makes the IRA his or her own IRA, the surviving spouse is treated as the IRA owner and not the beneficiary. Accordingly, the death distribution rules don’t apply. If the surviving spouse is not yet age 70 1/2, then no distributions have to be taken until then. So, as long as the same-sex couple is married, he or she can do a spousal rollover at death.
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