Can Widows Draw Money From Their Husband's IRA Account?

There are several options a widow may consider when a spouse has passed away and left an IRA account. The age of the widow, whether or not her spouse was already taking the required minimum distributions by law, and the state of her current income requirements should all be examined closely during the decision process. If you are confused about the procedure, contacting a financial consultant is always recommended before making any change to your accounts.

Mandatory Minimum Distributions

If the widow's spouse was past the age of 70-1/2 and had already begun taking the required minimum distributions, but the widow is under that age and does not need the immediate income, she may elect to wait until she is required to withdraw from the account in order to allow a longer period of tax-deferred growth.

Rolling the Funds Over

There are two options for a rollover: a direct transfer from her spouse's IRA into her own IRA account (also called a trustee-to-trustee transfer) or a complete withdrawal of the assets to be later deposited into an IRA account. If the assets are withdrawn, a widow will have a small 60-day window to redeposit the funds into her own IRA before she will owe income tax on the total amount withdrawn. If she is planning on redepositing the funds anyway, a direct rollover is the easiest and safest option to ensure she will not miss the 60-day window.

Inherited Accounts

Widows and widowers are the only IRA beneficiaries who have options for their inherited accounts; all others must retitle them as an inherited account and keep them separate from personal IRAs. There is only one real advantage for a widow to retitle an IRA to an inherited account and that is if the deceased was eligible to receive distributions and the surviving spouse is under the minimum age of 59-1/2, so she cannot receive penalty-free withdrawals and needs the supplementary income. If this is the case, there is a tax advantage to naming the account as an inherited IRA; the usual 10 percent penalty for early withdrawals is waived. However, taxes are still due on the distributions, unless it is an inherited Roth IRA, which has been funded with after-tax dollars. Once the widow reaches 59-1/2, she may roll the account into her own IRA.

Separate Account

The IRA may also be treated as a separate, individual account subject to the minimum age withdrawal requirements of the widow.

FDIC Insurance

One small advantage to keeping the IRA in the spouse's name (if the accounts are at the same banking institution) is that FDIC coverage for IRAs has a $100,000 maximum cap on it. If the widow rolls it into her own, she will only receive the $100,000 of protection for the entirety of the combined funds; if she keeps it as a separate account in her husband's name, both IRAs are eligible for up to $100,000 of FDIC protection. Contact an investment professional who can help you decide the best course for your situation.

References

• FiLife.com
• Federal Deposit Insurance Corporation

Resources

• Understanding IRAs
• Inheriting an IRA From Your Spouse