08 Jul My husband died. What should I do with his IRAs?

Q. My husband recently died. He had several IRAs. I understand I can create an inherited IRA or I can put the money in my name. What’s the difference for me and which is better? I already have my own IRA that I take RMDs from.
— Working it out

A. We’re very sorry for your loss.

As a surviving spouse, the rules for inherited IRAs are different from those for other kinds of beneficiaries.

You have the advantage of being able to roll over the IRA and become the owner of the IRA, said Jody D’Agostini, a certified financial planner with Equitable Advisors/The Falcon Financial Group in Morristown.

You didn’t mention your age, but that’s important here.

You may already be taking Required Minimum Distributions (RMDs) from your own IRA if you’re 72, or perhaps if you have another inherited IRA you’re already taking withdrawals from.

Or if you’re not yet 72, RMDs could be some years off.

If you’re not yet 72, you could roll over the IRA to your name entirely and you would not be required to take distributions yet, she said. If you are still working and have earned income, you could continue to contribute to the IRA. This will allow the IRA to grow until you reach age 72 when you will need to take RMDs, she said.

“You also can name your own beneficiaries,” D’Agostini said. “If you have children, friends or even a charity, then you can determine who to leave any money not withdrawn upon your death. This might maximize the value of the account.”

If you instead create an inherited IRA, there are rules that dictate when RMDs must be taken.

“You would need to begin RMDs by the later of Dec. 31 of the year after your husband’s death or when your husband would have reached age 72,” she said. “If you need money now, and are below the age of 59 ½, you can avoid the 10% penalty for early withdrawals.”

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This story was originally published on July 8, 2021.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.