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By Hallie Kraus
Losing a spouse is hard enough; trying to figure out what to do with their IRA probably isn’t topping your comfort list. The account itself is just numbers on a page, but what it represents is far more intimate: the life you shared, the plans you built together, and the resources they trusted you to steward.
Yet, when it comes to what to do with that inherited IRA, the rules can feel like a labyrinth, especially with the changes ushered in by the SECURE Act (2019) and its successor, SECURE 2.0 (2022). Understanding your options is about more than just compliance. It’s also about preserving your family legacy, exercising leadership in financial decisions, and shaping the future you both envisioned.
Unlike other beneficiaries, surviving spouses have extraordinary flexibility that can shape not only their financial future but the long arc of their lives. One of the most powerful options is to treat the inherited IRA as your own. Doing so preserves the tax advantages of the original account (tax-deferred growth for traditional IRAs, or tax-free growth for Roth IRAs) and opens the door to making additional contributions. RMDs are calculated based on your age, not your late spouse’s, allowing younger spouses to delay distributions for years and letting assets grow.
If the inherited assets are needed for living expenses, maintaining the account as an inherited IRA and taking life expectancy payments may be the better path. In this approach, RMDs are calculated based on your life expectancy, though the timing of when those distributions must begin depends on whether your spouse had already reached their required beginning date. This can spread distributions more gently across time, providing predictable cash flow while keeping assets in a tax-advantaged environment. If circumstances change, you can later convert the inherited IRA into your own, though this choice is generally considered irreversible. The decisions you make here are not just financial; they reflect your role as a steward of family resources and long-term vision.
Roth and traditional IRAs diverge in rules, taxes, and long-term strategy. Roth IRAs, when open for at least five years, allow tax-free withdrawals, offering breathing space to manage other income streams or investments. A surviving spouse can roll an inherited Roth into their own Roth IRA, preserving decades of uninterrupted growth. Traditional IRAs carry taxable distributions, yet the early withdrawal penalty does not apply to a spouse inheritor. This distinction opens the possibility for Roth conversions, paying taxes today to free growth from future taxation (a strategic choice that requires attention to your current and expected tax circumstances.)
Beyond these foundational decisions, other paths exist. Examples include lump-sum withdrawals for immediate needs, periodic or random distributions, or even disclaiming the inherited assets to allow them to pass to the next beneficiary. Each choice carries financial and personal implications, and each deserves careful reflection. Planning around a spousal inherited IRA is as much about agency as it is about numbers. Ask yourself: How do you want to steward what has been entrusted to you? How does this account fit into the story of the legacy you wish to leave? Thoughtful planning helps transform the complexity of rules into opportunity and clarity.
Inheriting an IRA can feel intense, but it also provides a chance to make intentional choices. Whether you take distributions gradually, convert assets to a Roth, or roll a Roth IRA into your own account, each decision shapes how the inheritance supports your life and long-term goals, helping you honor your spouse’s legacy while advancing your own financial vision.
If you have inherited a spousal IRA or expect to in the future, reach out to the Treehouse Wealth Advisors team. We can help you explore your options, create a personalized strategy, and work together to ensure this inheritance serves both your present needs and your long-term goals.
Garrison Point Advisors, LLC doing business as “Treehouse Wealth Advisors” (“TWA”) is an investment advisor in Walnut Creek, CA registered with the Securities and Exchange Commission (“SEC”). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. TWA only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of TWA’s current written disclosure brochures, Form ADV Part 1 and Part 2A, filed with the SEC which discusses among other things, TWA’s business practices, services, and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov.
Certain hyperlinks or referenced websites, if any, are for your convenience and forward you to third parties’ websites, which generally are recognized by their top-level domain name. Any descriptions of, references to, or links to other products, publications or services does not constitute an endorsement, authorization, sponsorship by or affiliation with TWA with respect to any linked site or its sponsor, unless expressly stated by TWA. Any such information, products or sites have not necessarily been reviewed by TWA and are provided or maintained by third parties over whom TWA exercises no control. TWA expressly disclaims any responsibility for the content, the accuracy of the information, and/or quality of products or services provided by or advertised on these third-party sites.
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