RMD Rules and Spousal Rollover Options for Inherited Retirement Accounts

Surviving spouses can roll inherited IRAs into their own accounts, resetting the RMD schedule based on their age. If your spouse had outstanding RMDs, those must be taken by year-end even in the year of death. Strategic Roth conversions can reduce future RMDs and tax brackets.

The immediate issue: If your spouse had RMDs and hadn't taken them for the year they passed away, that final RMD still must be taken. Missing it triggers a 25% penalty on the amount not withdrawn. This is easy to overlook during a difficult time, and it has a hard deadline.

Spousal rollover changes the timeline: Once you roll your spouse's IRA into your own, the RMD schedule resets based on your age. If you're younger, this can delay or reduce required withdrawals -- sometimes significantly.

The bracket squeeze: The same account balances now generate distributions taxed on a single-filer schedule with narrower brackets. RMDs that were manageable on a joint return can push you into higher rates as a single filer.

The tradeoff: RMDs are mandatory -- you can't avoid them. But you can plan around them. In years when other income is temporarily lower, Roth conversions can shift money out of tax-deferred accounts, reducing future RMDs permanently. A CPA can model the optimal conversion amount so you don't overshoot into a higher bracket.