If you have recently lost a spouse, you know that there are lots of important decisions to be made and it is very easy to become overwhelmed. For this reason, financial planners often advise their clients to not make any major life decisions for at least six months after a spouse has died.
One of the big choices that surviving spouses are called upon to make is what to do with their spouses' IRA. Basically, there are two choices. The surviving spouse can leave the account in the name of the deceased spouse or they can roll the account into their own IRA. The choices seem simple enough but there are actually some fine points that are critically important.
If you are under age 59 1/2 and unsure if you will need to take money from your spouse's IRA, you should leave the IRA in the name of the deceased spouse. Doing so will allow you to withdraw money from the account without owing an early withdrawal penalty. Alternatively, if you roll the account into your own IRA, you will lose the ability to make penalty free withdrawals. To provide maximum flexibility for surviving spouses under age 59 1/2, the best course of action is generally to leave the IRA in the late spouse's name and re-title the account later when the surviving spouse reaches age 59 1/2.
Since seemingly simple financial choices can have very negative effects, you should consider consulting with a financial planning or tax professional before making any decisions.