Surviving spouse elections

[Guest Christine]

An IRA lets the surviving spouse choose whether benefits will be payable in accordnace with the 5 year rule or as an exception to the 5 year rule. The IRA does not specify the method of distribution after the accountholder's death. If the survivng spouse does not make an election, the regulations provide a default provision. The default is that the distribution method will a life annuity. Under the Code, the survivng spouse can delay distributions under this method until the dime the deceased would have reached 70-1/2. What is the last day on which a survivng spouse may elect to receive benefits in accordance with the 5 year rule or as an exception to the 5 year rule before the default provision becomes operational? Pub. 590 indicates that it's December 31st but I can't reconcile that with the regulations.

[Dave Baker]

There's an obscure reg under Code section 408 that says the surviving spouse is considered to have elected to treat the IRA as his/her own if he/she misses the 5-year distribution deadline ... that to keep the spouse out of minimum distribution trouble the IRS assumes the spouse has decided to consider the IRA as an "inherited IRA," meaning the after-death minimum distribution rules don't apply, but instead only the 70-1/2 minimum distributions (as applied to the surviving spouse).

1.408-2(B)(7)(ii). It's confusing because only a surviving spouse now is able to get the treatment described in that reg (which was issued before the statute was changed to provide that only surviving spouses can have "inherited" IRAs).