IRS Allows Rollover of IRA from Estate to Spouse

IRS Allows Rollover of IRA from Estate to Spouse


As I tell my clients and audiences during presentations, one should never name one's estate as beneficiary of an IRA or other retirement account.  If the estate is the beneficiary, whether from a purposeful designation, failure to name a beneficiary, or failure update when a named beneficiary dies, the account must go through probate and stretching is unavailable.  The result is more fees and more taxes.

However, in some cases, the IRS will allow a surviving spouse who is the sole beneficiary of the decedent's estate to effectuate a rollover.  In Private Letter Ruling 201211034, the IRS stated that the surviving spouse and sole beneficiary of decedent's estate may either:

(1) by means of a trustee-to-trustee transfer, transfer the proceeds from the original IRA into an new IRA established and maintained in the spouse's name; or

(2) take a distribution of the proceeds of the original IRA and rollover the proceeds into a new IRA established and maintained in the spouse's name as long as the rollover transaction occurs no later than the 60th day from the date said proceeds of the original IRA are distributed.

The IRS further ruled that in either case, the proceeds in the trustee-to-trustee transfer or the timely rollover will be exempt from the withholding requirements under section 3405(c)(2) of the Code.

Gregory Herman-Giddens, JD, LLM, TEP, CFP, Attorney at Law (NC, FL, TN), Board Certified Specialist in Estate Planning and Probate Law (NC). North Carolina Registered Guardian, Solicitor, England and Wales. Follow his blog, North Carolina Estate Planning Blog..

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