Spousal IRA Rollover
I’ve seen something put out by a vendor that made me ask a question.
Specifically, the information stated that in order to do a spousal rollover, the spouse must be the sole beneficiary. That is perfectly understandable.
What if there are named contingent beneficiaries, e.g., adult children or a Credit Shelter Trust?
Does a named contingent beneficiary in any way interfere with a spouse’s ability to execute a spousal rollover, if the wife is the sole primary beneficiary?
Permalink Submitted by Alan Spross on Thu, 2007-11-08 19:22
No, a contingent beneficiary does not affect the spousal rollover. Of course, any contingent beneficiary of the decedent is effectively voided if the primary beneficiary does not disclaim their interest. The surviving spouse needs to re establish their own successor beneficiaries ASAP for this reason, even if intending to do a rollover in the near future.
Once a rollover is done, it is too late to disclaim. The only distribution that can be taken while maintaining disclaimer options is the RMD that the decedent failed to take in the year of death.
With respect to the stated vendor information, the spouse does NOT have to be the sole beneficiary in order to take a partial distribution and roll it over to their own IRA, as long as it is not an RMD requirement. In that case, the survivor needs to establish successor beneificiaries on both the the new and inherited IRA accounts.
I often wonder if IRA custodians keep good records of the date on beneficiary designations so that they know whether a contingent beneficiary designation is valid or expired with the original IRA owner.
Permalink Submitted by Al Fry on Thu, 2007-11-08 20:35
In regards to bene arrangements, I would hope the custodians have good records, since many IRA owners do not!
Permalink Submitted by Al Fry on Thu, 2007-11-08 20:39
Another comment is that sometimes the “spouse sole bene” requirement to use the joint life table in case of a trophy spouse is confused with the spousal rollover rules.
Permalink Submitted by Denise Appleby on Thu, 2007-11-08 21:13
[quote=”chris@championshipfinanci“]I’ve seen something put out by a vendor that made me ask a question.
Specifically, the information stated that in order to do a spousal rollover, the spouse must be the sole beneficiary. That is perfectly understandable.
What if there are named contingent beneficiaries, e.g., adult children or a Credit Shelter Trust?
Does a named contingent beneficiary in any way interfere with a spouse’s ability to execute a spousal rollover, if the wife is the sole primary beneficiary?[/quote]
[quote=”[email protected]“]
With respect to the stated vendor information, the spouse does NOT have to be the sole beneficiary in order to take a partial distribution and roll it over to their own IRA [/quote]
8) An often confused provision.. or maybe they just used the wrong terminology? 😆 the treat-as-own option applies only if the spouse is the sole beneficiary of the IRA and have an unlimited right to withdraw amounts from the IRA. But, as Alan said, this does not prevent the spouse from rolling over the amount to her own IRA.
The key is to understand what ‘treat as own means. According to the RMD regs, it means:
—-The spouse does not take RMD amounts from the IRA
—-The spouse makes contributions to the IRA, and/or
—-The spouse redesignates the IRA in the name of the spouse , instead of as a ‘beneficiary’ IRA