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. Upon my death, will the beneficiaries of my IRA be compelled to take the entire amount ...

    It depends. If the beneficiary of your IRA is your spouse, he or she will be eligible to transfer the amount to his or her ... Read Answer >>
  2. Can the non-spouse beneficiary of an IRA name a successor beneficiary?

    Whether the beneficiary of an individual retirement account (IRA) can name a successor beneficiary (second generation beneficiary) ... Read Answer >>
  3. Can an IRA beneficiary roll the IRA over into another account and designate another ...

    It depends on the provision of the IRA plan document. Some (though very few) do not allow the designation of successor beneficiaries. ... Read Answer >>
  4. If a trust is named as the beneficiary of an IRA, can the trustee of that trust become ...

    While the IRA owner is alive, only the IRA owner can change the designated beneficiary of the IRA. Exceptions may apply if ... Read Answer >>
  5. My spouse is the primary beneficiary of my IRA. I also have a contingent beneficiary. ...

    A spouse who is the sole primary beneficiary of an IRA can always treat the IRA as his or her own. The contingent beneficiary ... Read Answer >>
Related Articles
  1. Retirement

    Mistakes In Designating A Retirement Beneficiary

    Make sure your beneficiary designations not only reflect your intentions but also meet the requirements to be effective.
  2. Financial Advisor

    How to Handle Client Beneficiary Designations

    Beneficiary designations are a critical financial planning step that can be easily overlooked. Here's how to ensure they are properly done.
  3. Retirement

    An Estate Planning Must: Update Your Beneficiaries

    Life changes make it time to rewrite your plan's designations.
  4. Financial Advisor

    Why You Need to Find the Right IRA Beneficiary

    It definitely matters who you pick as your IRA beneficiary—and how you go about it. And in some cases, your best option may be to go with a trust.
  5. Financial Advisor

    Top Estate Planning Tips for 401(k)s and IRAs

    Here's how to avoid estate planning pitfalls when it comes to leaving IRA and 401(k) assets to heirs.
  6. Retirement

    A Look at Protecting Children With an IRA Trust

    Too many people make huge and irreversible mistakes when naming the beneficiaries for their retirement accounts.
  7. Retirement

    3 Deadlines For Retirement Plan Beneficiaries

    To take full advantage of new RMD regulations, beneficiaries need to take action before important deadlines.
  8. Retirement

    Why You Need to Update Retirement Account Beneficiaries

    The designation of beneficiaries in retirement accounts takes precedence over a will. Don't forget to keep them updated.
  9. Financial Advisor

    Why Your Will Should Name Designated Beneficiaries

    Find out how to make the tough decisions when it comes to choosing who will receive your assets and how they will be paid out.
  10. Financial Advisor

    Inherited IRA and 401(k) Rules: Don't Run Afoul

    What you need to know when it comes to the complex rules for inherited IRAs and 401(k)s.
RELATED TERMS
  1. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  2. Extended IRA

    An IRA that allows a second generation beneficiary to continue ...
  3. Inherited IRA

    An individual retirement account that is left to a beneficiary ...
  4. Named Beneficiary

    This term refers to any beneficiary named in a will, a trust, ...
  5. IRA Asset Will

    A document that specifies how the assets in an individual retirement ...
  6. Primary Beneficiary

    A beneficiary in a will, trust or insurance policy that is first ...
Hot Definitions
  1. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  2. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  3. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  4. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
  5. Redlining

    The unethical practice whereby financial institutions make it extremely difficult or impossible for residents of poor inner-city ...
  6. Nonfarm Payroll

    A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number ...
Trading Center