If a policyowner named their spouse as a beneficiary but passed away before any distributions, what can happen to the account?

When a policyowner names their spouse as a beneficiary and subsequently passes away, the surviving spouse has the option to roll the account into their own Individual Retirement Account (IRA). This is a valuable benefit provided under IRS rules, specifically designed to allow spouses to maintain the tax-advantaged status of the inherited retirement account.

By rolling the account into the surviving spouse's IRA, they can continue to defer taxes on any contributions and earnings until withdrawal, which is especially beneficial for long-term financial planning. This rollover option is unique to spousal beneficiaries and provides them greater flexibility in managing their financial situation after their partner's death.

The other options—such as forfeiture of the account, transfer to the state, or splitting among children—do not apply when a spouse is named as the beneficiary. These scenarios generally occur in different contexts, such as when there are no designated beneficiaries or if the beneficiaries are non-existent or unwilling to accept the inheritance. Therefore, rolling the account into the surviving spouse's IRA is the most advantageous and applicable outcome in this situation.