Deceased Participant - Spouse's Options

[KateSmithPA]

61 year old participant dies leaving a benefit of about $400,000. 47 year old spouse is sole beneficiary. In the following few months, she has withdrawn about $138,000, most of it going to children and who knows what. Broker would like to help her protect what is left (really).

From a tax aspect, may she roll the balance of the account into her own IRA and begin taking substantially equal installments and avoid the 10% penalty? I believe she can roll into an inherited IRA and withdraw without the penalty but she may run into the RMD rules sooner than later.

Thank you.

Kate Smith

[masteff]

http://www.irs.gov/pub/irs-pdf/p590.pdf

See page 54, paragraphs w/ heading "Beneficiary". Best thing is to keep it as a beneficiary account for now. Worry about what change to make to avoid MRDs in year that participant will have been 69 (better a year early than a day late).

Oh, and she doesn't have the 10% penalty in the plan or (I think) an inherited IRA because it's due to death (form 5329 line 2 exception code 04).