New in 2024: Special RMD Rule for Surviving Spouses

Spousal rollover alternative for an inherited retirement account

The SECURE Act 2.0, passed at the end 2022, raised the required beginning date (“RBD”) for Required Minimum Distributions (“RMDs”) to age 73.

The Act also contained a special provision for RMDs where a surviving spouse is the sole beneficiary of an employer retirement account or individual retirement account (IRA).

If the retirement account participant or IRA owner had not yet reached their RBD as of their date of death, the beneficiary spouse can now make an irrevocable election to be treated as the deceased spouse for purposes of receiving RMDs from the account. The election, therefore, allows the surviving spouse to defer RMDs until the date that the deceased spouse would have had to begin receiving RMDs, as opposed to when the surviving spouse reached their RBD.

Example

If a husband, age 60, passes away and is survived by a wife who is 68 years old and the sole beneficiary of the account, this election would allow the wife to delay the start of RMDs from the account until the time that the deceased husband would have reached age 73. Prior to this rule, the beneficiary spouse would have had to begin taking RMDs when she turned 73. In this example, making the election defers the start of RMDs on the account for an additional eight years.

Surviving spouse IRA rollover considerations and next steps

As a result of this new provision, extra caution should be taken before rolling the decedent’s IRA into the surviving spouse’s IRA as doing so would negate the effect of this special election and require the surviving spouse to start receiving RMDs on his or her RMD date. If the surviving spouse intends to make this election, he or she would need to keep the decedent’s existing IRA account in place until the date at which they have to begin taking RMDs. Only then, should the decedent’s IRA be rolled into the surviving spouse’s IRA.

This provision is effective for tax years beginning after December 31, 2023, and requires an affirmative election by the surviving spouse. At this time, the IRS has not issued guidance as to how to make the affirmative election. However, a surviving spouse wishing to make an election should send a letter to the IRA custodian or plan administrator that they are making the election provided under IRC section 401(a)(9)(B)(iv) and should not roll over the decedent’s IRA account into their own.

If you have specific questions on this provision or other estate planning matters, consult your Keiter Opportunity Advisor.