Jr. Legal Update is intended for general information purposes for our clients and friends and highlights recent changes and developments in the legal area. This publication does not constitute legal advice, and the reader should consult legal counsel to determine how this information applies to any specific situation. In a marriage, one spouse usually names the other as the preferable death beneficiary of his or her Individual Retirement Account. The IRA provides cash for the surviving spouse's support. These payments, made directly to a spouse or to certain trusts, qualify for the federal estate tax marital deduction.
Income taxes are payable only as distributions are received.
There are a number of practical steps the surviving spouse can take to maximize income tax deferral. The surviving spouse may elect to treat the IRA as his or her own, divide it into separate accounts, and name each child a death beneficiary of an account. This permits use of a new joint life expectancy to determine the periodic payout. A recent IRS letter ruling clarifies the tax results of this action. The ruling concerns a surviving spouse with three adult children.