When a spouse dies, the last thing the survivor wants to deal with is higher taxes. But that’s exactly what can happen if he or she is caught in the “survivor trap.” Fortunately, there are some strategies you can use to avoid the trap — or at least ease the pain.

Detecting the trap

Why does the survivor trap happen? Typically, it’s because the surviving spouse changes filing status from married filing jointly to single, while his or her income remains roughly the same. This situation can force the survivor into a higher tax bracket.

For example, based on the 2024 federal income tax brackets, a married couple filing jointly with $300,000 in taxable income would be in the 24% bracket. But a single filer with the same income would be in the 35% bracket. The trap may also ensnare surviving spouses if certain tax breaks enjoyed by married couples (such as higher child tax credits or educational expense deductions) are reduced or eliminated.

Additionally, the trap can affect retired couples who are subject to required minimum distributions (RMDs) from traditional IRAs and employer-sponsored retirement plans. These RMDs can trigger significant tax liabilities and must be taken regardless of whether the recipient needs the money.

Navigating the minefield

If you’re in danger of falling into the survivor trap, consider these strategies to mitigate its impact:

Perform a Roth conversion. With proper planning, married couples can reduce or eliminate RMDs, allowing a surviving spouse to minimize his or her income. One strategy is to convert traditional IRAs into Roth IRAs, which allow for tax-free distributions. Plus, you’re not required to take RMDs from Roth accounts. Although you’ll pay tax on the converted amount at the time of the conversion, you can soften the blow by performing a series of partial conversions over several years. That way, you’ll pay the tax in more manageable installments and avoid pushing yourself into a higher tax bracket by converting the entire amount in one year.

Donate to charity. If you’re a surviving spouse who’s charitably inclined, consider making a qualified charitable distribution (QCD) from a traditional IRA. If you’re 70½ or older, you can donate up to an inflation-adjusted $100,000 per year ($105,000 for 2024) directly from an IRA to a qualified public charity. Unlike regular distributions from an IRA, QCDs are excluded from your adjusted gross income, but they still count toward your RMDs for the year.

Make the most of spousal rollovers. If you inherit an IRA from your spouse, transferring the funds to a spousal rollover IRA can provide a big tax advantage, especially if you’re significantly younger than your spouse.

For example, let’s say Frank, 82, has a large balance in his traditional IRA, so his annual RMDs are significant. He dies in 2024, leaving the IRA to his wife, Margaret, 64. Were Margaret to leave the money in the inherited IRA, the RMDs would have continued. But if she transfers the balance to a spousal rollover IRA, she can avoid the tax hit associated with the RMDs. Then the account can continue growing on a tax-deferred basis until she starts taking RMDs at age 75.

Have a plan

These are just a few examples of strategies you can use to mitigate the impact of the survivor trap. Other possibilities include harvesting capital losses to offset capital gains, increasing charitable donations to take advantage of itemized deductions, giving away income-producing assets to children or other loved ones in lower tax brackets, moving to a state with low, or no, income tax, or purchasing life insurance to cover the cost of additional taxes.

The important thing is to plan not only for retirement as a couple, but also for the possibility that one spouse will have to adjust tax strategies if his or her partner dies. Your advisor can help you choose which strategy is right for your family.

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