A:

If your spouse is the designated beneficiary of your retirement plan, the assets will pass to him or her tax free. The general rule stipulates that upon the death of a retirement plan participant or IRA owner, the retirement plan (or IRA) assets pass to the designated beneficiary tax free. Note that this transfer of ownership is not a transaction that will be reported to the IRS. No reporting will be done to the IRS until the beneficiary takes a distribution of assets from the retirement account.

You should consult with your plan administrator (or IRA custodian or trustee, for IRAs) regarding their policies and procedures to effect this transfer of ownership. Some will allow the beneficiary to retain the assets in the account owned by the deceased and re-title the account to include the name of the beneficiary, while others require the beneficiary to establish a separate account to which the inherited assets will be credited. For either option, any distribution(s) that occur after the death of the participant should be reported under the beneficiary's tax ID number.

This question was answered by Denise Appleby (Contact Denise)

RELATED FAQS

  1. When can benefits be received from a provident fund?

    Find out when participants in provident funds can begin receiving benefits, including how funds can be used to finance important ...
  2. Is Social Security Income a perpetuity?

    Find out why Social Security income is not classified as a perpetuity, including what constitutes a perpetuity and the basics ...
  3. What types of investments are allowed in a provident fund?

    Read about the types of investments allowed in various provident funds around the world, including the Indian, Malaysian ...
  4. How does a provident fund compare to U.S. Social Security?

    Find out how provident funds compare to the U.S. Social Security program, including examples of income limits and contribution ...
RELATED TERMS
  1. See-Through Trust

    A trust that is treated as the beneficiary of an individual retirement ...
  2. Settlor

    The entity that establishes a trust. The settlor also goes by ...
  3. Backdoor Roth IRA

    A method that taxpayers can use to place retirement savings in ...
  4. Personal Representative

    The executor or administrator for the estate of a deceased person. ...
  5. Current Service Benefit

    The amount of pension benefit accrued by an employee who had ...
  6. Contingent Beneficiary

    1. A beneficiary specified by an insurance contract holder who ...

You May Also Like

Related Articles
  1. Retirement

    Does it Make Sense to Have an MLP in ...

  2. Entrepreneurship

    MLPs: How They Are Taxed

  3. Retirement

    Top Tips for Rebalancing 401(k) Assets

  4. Professionals

    Few Target-Date Managers Invest in Their ...

  5. Fundamental Analysis

    Should You Hire an Advisor or DIY Your ...

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!