Greetings, Sharon, and welcome. You asked:<<When a spouse dies, does their IRA roll over to the living spouse, or does it have to be cashed in and taxes paid? >>The answer can get complicated depending on the IRA owner's age at death (i.e., younger or older than 70 1/2)and who the owner named as beneficiary of that IRA. For simplicity, we'll just say that the spouse is the named beneficiary. That way age doesn't enter the picture.In the above example, when the owner dies, the spousal beneficiary may do one of two things:a. Take over the IRA as his/her own as the outright owner or "roll" the proceeds to his/her own IRA. In doing so, distributions would not have to start until the spousal beneficiary attains age 70 1/2. When distributions start, they will be taxed at the ordinary income tax rates in effect at that time.b. Leave the IRA in the decedent's name, and take distributions starting when the decedent would have turned age 70 1/2 had he/she lived. When distributions start, they will be taxed at the ordinary income tax rates in effect at that time.Regardless of which route the spousal beneficiary takes, the IRA will count as part of the decedent's estate at time of death, so it could be usbject to federal estate taxes if the entire estate is large enough (anything over $675K this year).See my article "Have You Checked Your IRA Lately?" at http://www.fool.com/retirement/retireeport/2000/retireeport000124.htm.Regards..PixyRegards..Pixy
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