Widowed? You Can Legally Delay Taxes on That IRA for Decades

The Unique Advantages Surviving Spouses Have With Inherited IRAs

Losing a spouse is devastating. The last thing anyone wants to think about is tax strategy. But the decisions made in the months following a spouse’s death can affect your financial security for decades. Surviving spouses have options that no other beneficiary receives—options that can legally defer taxes for 20, 30, or even 40 years.

Option One: The Spousal Rollover

As a surviving spouse, you can roll your deceased spouse’s IRA directly into your own IRA. This is called a spousal rollover, and it’s the most powerful option available to any beneficiary.

Here’s what happens: the inherited IRA becomes your IRA. Completely. You’re treated as if you had always owned the account. Required minimum distributions follow your life expectancy, not your deceased spouse’s. If you’re 62 when your spouse passes, you won’t face RMDs until you turn 73.

That’s potentially 11 years of continued tax-deferred growth before mandatory withdrawals begin.

Option Two: Remain as Beneficiary

Sometimes treating the IRA as your own isn’t the best choice. If you’re under 59½ and need access to the funds, remaining as the beneficiary of an inherited IRA avoids the 10% early withdrawal penalty.

The calculation: you take distributions based on your single life expectancy, recalculated annually using IRS tables. For a 55-year-old spouse, that’s roughly 31.6 years of distributions—far better than the 10-year rule that applies to non-spouse beneficiaries.

Once you reach 59½, you can roll the inherited IRA into your own IRA and eliminate the beneficiary restrictions entirely.

Delaying Taxes for Decades: A Real Example

Consider this scenario: Margaret, age 58, inherits her husband’s $800,000 traditional IRA. She doesn’t need the money immediately—she has her own savings and continued employment.

If she does a spousal rollover:

• The IRA becomes hers
• No RMDs until age 73 (15 years away)
• Account grows at 6% annually to approximately $1.9 million by age 73
• First RMD at 73: roughly $73,000

If she remains as beneficiary:

• RMDs begin immediately based on her life expectancy
• First year RMD: approximately $25,000
• Less tax-deferred growth due to annual withdrawals

For Margaret, the spousal rollover provides 15 additional years of compounding. At 6% growth, that’s a $600,000+ difference in account value.

The Roth Conversion Opportunity

Widowed individuals often experience a temporary drop in income. The year a spouse dies may include only partial employment income for the deceased. The following years may see reduced household income overall.

This creates a Roth conversion window. Lower income means lower tax brackets. Converting $50,000 or $100,000 annually from the inherited traditional IRA to a Roth IRA during these low-income years locks in lower tax rates permanently.

Once in the Roth, the funds grow tax-free. There are no RMDs during your lifetime. Your heirs inherit tax-free (though they still face the 10-year distribution rule).

Critical Timing Considerations

If your spouse died before beginning RMDs: You can delay your decision. Leave the account as an inherited IRA while you assess your financial situation. Roll it over later when you’re ready.

If your spouse died after beginning RMDs: You must continue taking RMDs in the year of death if your spouse hadn’t already taken their annual distribution. After that, you can roll over to your own IRA.

If you’re already older than your deceased spouse: Using the inherited IRA rules (instead of rolling over) might provide smaller RMDs based on your spouse’s younger age at death. Run the calculations before deciding.

Don’t Rush the Decision

You have time. The IRS doesn’t require an immediate decision. Consult with a tax professional or financial advisor who understands the nuances of inherited IRA rules for surviving spouses. The right choice depends on your age, income, need for funds, and long-term plans. But the options you have—options no other beneficiary receives—can legally defer taxes for decades.