IRA owner took a distribution of his entire IRA by transferring it to a checking account that is joint with his spouse. She then wrote a check to herself out of the joint checking account and deposited it into her savings account, on which he is not joint. These moves were done on the advice of an estate attorney, btw, to qualify him for Medicaid.
Then the original IRA owner died, literally two days later.
Clearly the 60 day rollover period has not expired. She has not touched the money. Can she now put it into a new IRA that she owns, and consider it a rollover?
I don't agree. About 10 years ago, the IRS established the procedures for automatic waiver and requesting waivers for violating the 60 day rule for rollovers. One of the waivers that could be requested was the inability to complete the rollover in 60 days due to the death of the owner. It certainly seems to me that if the IRS is willing to grant relief to perform a rollover beyond 60 days because the owner died, they certainly would allow the rollover to be completed before the 60 day period had elapsed. See Rev. Proc. 2003-16, Sec. 3.02(2).
I have not seen any private rulings on what the procedure would be to complete the rollover.
E.g. A rollover from an IRA requires that the funds be redeposited into another qualified plan or IRA that is owned by the same owner. You can't rollover the funds from Joe's IRA to Jane's IRA.
If an IRA owner dies and the surviving spouse is the beneficiary, the IRA can be rolled over to an IRA owned by the surviving spouse.
It seems to me that one must must first complete the rollover before the surviving spouse can take ownership. I would recommend that the funds be deposited into the rollover IRA that is in the name of the decedent. The surviving spouse could then treat it as her own or roll it over into her own IRA.
As I was writing the above, I started to think about whether the person (personal representative of the estate or surviving spouse) completing the rollover could name a new beneficiary just like the owner, had he lived, could have changed the beneficiary.
E.g., the original IRA named a former spouse. Owner takes distribution and dies. 60 day window is still open. Surviving spouse completes the rollover and names herself as beneficiary on the rollover IRA. Surviving spouse then takes ownership of the IRA. Does the former spouse have any legal recourse because it was not the owner who changed the beneficiary?
Art, ignoring the fact that there was really no intent to effect a rollover, it would seem that there's a case to be made for a legitimate rollover after death.
In a Q&A on the IRS site (see
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How does IRS determine whether to grant a waiver? whether you were unable to complete the rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country or postal error;
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So we have evidence that even if the 60 days passed, the IRS would permit death as a good reason to waive the 60 day rule. If it hasn't passed yet, I'd deposit the funds right back into the name of the deceased and wouldn't expect an issue.
(Disclaimer - I'm bringing up a point, not stating a fact. From the above, I'm led to believe this conclusion, but am still open to it going either way.)
Why not just create an account called Inherited IRA and roll it over into that? That's what was done when I inherited part of an IRA from my father's trust when he died.
Because the IRA was not inherited by the beneficiary. The original IRA no longer exists. There is no IRA to inherit until the rollover is completed. ================ I'm going to agree with Alan on this one but for a slightly different reason: A surviving spouse can treat the IRA as his/her own. No other beneficiary can do so. Therefore, rollover treatment is proper for this situation. However, she must complete the transaction in HIS name first, then place her name on the account due to his death. Spouses can roll over inherited accounts from deceased spouses.
The answer would be quite different for a non-spouse beneficiary.
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