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 >>
Related Articles
  1. Retirement

    What You Should Know About IRA Beneficiaries: Part 2

    Here's how IRAs, and the beneficiaries you name, work with wills and trusts.
  2. 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.
  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. 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.
  6. Retirement

    Distribution Rules For Inherited Retirement Plan Assets

    If you've recently inherited a retirement plan, you must get to know the rules for distributing the funds.
  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. 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.
RELATED TERMS
  1. Inherited IRA

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

    This term refers to any beneficiary named in a will, a trust, ...
  3. Transfer On Death - TOD

    A way of designating beneficiaries to receive your assets at ...
  4. Stretch IRA

    An estate planning concept that is applied to extend the financial ...
  5. Absolute Beneficiary

    A designation of a beneficiary that can not be changed without ...
  6. Secondary Beneficiary

    A person or entity that inherits assets under a will, trust or ...
Hot Definitions
  1. Five Cs Of Credit

    A method used by lenders to determine the credit worthiness of potential borrowers. The system weighs five characteristics ...
  2. Straddle

    An options strategy in which the investor holds a position in both a call and put with the same strike price and expiration ...
  3. Trickle-Down Theory

    An economic idea which states that decreasing marginal and capital gains tax rates - especially for corporations, investors ...
  4. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that eventually eliminated tariffs to encourage economic activity between the United ...
  5. Agency Theory

    A supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving ...
  6. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations ...
Trading Center