Question: Can a surviving spouse execute a 60-day rollover of retirement assets inherited from a company plan that was first paid to the decedent’s estate (where the spouse is the sole beneficiary of the estate)?
Answer: Believe it or not, a not-so unfamiliar problem is an improper or non-existent beneficiary designation. To clarify: it’s not an abnormal to have an individual, often married, dying with a retirement plan that was never assigned a designated beneficiary. Under most plan default rules, in that case, the decedent’s estate is the beneficiary. Accordingly, after federal and state taxes are withheld, the plan administrator would issue a lump sum payment to the estate. As I have written about before, IRA owners should do everything possible to prevent the estate from being named as the beneficiary.
If there is a surviving spouse, the IRS will now generally allow the spouse to rollover the distribution from the estate to himself or herself and then to their own IRA. IRS guidance tells us that the IRS will grant this rollover request (the rulings I’ve reviewed were generally done within 60-days from the date of the issued distribution).
Comment: Even though IRA or retirement assets were first paid to an estate or trust, the IRS did allow a surviving spouse to execute a 60-day rollover. This is particularly favorable relief in an area of the law where not a lot of tax relief is generally granted for screw-ups (inadvertent or not).
As always, if you have any questions or would like to learn more, please contact Steve Shane at firstname.lastname@example.org or .
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Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.
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