What happens to an Inherited Account when the Owner Dies prior to their Required Beginning Date (RBD) and the Spouse is the beneficiary?
If the spouse is the beneficiary, he or she will have the option to do one of the following;
1. Roll over the inherited amount and treat as own; Or,
2. Begin distributions the year the owner would have reached age 70½.
The election allowing the spouse to treat the inherited IRA as his/her own can be made at any time after the date of death. "If the spouse elects to treat the retirement account as his/her own, the account no longer qualifies for the 72(t) death exception. This could be quite costly to a potential younger spouse who needs access to the funds and fails to meet any of the other penalty exceptions."