surviving spouse

[Guest KLCarter]

Participant in profit sharing plan dies at age 60, with suviving spouse as primary beneficiary.

Suriving spouse is 58. Surviving spouse elects to leave funds in the plan so that she will not be subject to the 10% penalty for early withdrawal. she anticipants needing to make some withdrawals, but does not want to be required to begin MRD based on her life expectancy.

By not rolling over the funds into an IRA in her own name, does she give up the ability to defer distributions until age 70 1/2?

If the plan administrator "sets up an account" in spouse's name, is there any danger that these funds will be considered "rolled-over."

thanks for your input . . . .

[Leopurrd]

The funds have to be distributed to the spouse within 5 years, since the death occurred before the Required Beginning Date for 70 1/2 distributions. I believe there may be a way around this if she elects to take an annuity over her life expectancy.

Also, death is one of the exceptions to the 10% rule. Might be easier to roll into her own IRA?

[Belgarath]

Sorry, but I don't necessarily agree that the distribution must take place in 5 years. Assuming (always dangerous to assume) that the surviving spouse is the sole beneficiary, see 1.401(a)(9)-3, Q&A-3(b)(2). Assuming the plan allows it, I don't see why she couldn't leave it in the plan, and withdraw as needed and permitted by the plan.

[Guest mjb]

L you have any cite for your statement? 5 yr rule does not apply to surviving spouses