ira for dead person
I hope someone can answer this. In Ed’s seminars he always brings up the irs position that “you cant open an ira for a dead person” The irs says that ira’s are for retirement and a dead person need not plan for retirement. However there was an exception on a PLR for a spouse who wanted to open an ira in her deceased husbands name ( who never had an ira) and roll the qrp into the ira. Sorry but I done have case number but the point is that the exception was for spouse only..and it was a recent ruling after ppa 2006.
If this is the case how is it that if a father had a 401k and son as beneficiary, and father had no IRA, it is permissible for son to move funds by trustee to trustee transfer to an ira titled ” Father Smith , deceased, FBO Son Smith”
(assuming plan doc allowed this )
Son would have to open an inherited IRA to accomplish this. If father never had an IRA it would fly in the face of the above mentioned IRS position that only a spouse can do this.
I checked with my firm and they say yes , under these circumstances a non spouse can open a properly titled inherited ira.
In every seminar ED makes a BIG deal on this point . again, that you cant open an IRA for a dead person yet that is exactly what you need to do in these cases.
Can anyone tell what the above mention PLR was about and what I am missing..
Thanks
Son would have
Permalink Submitted by Al Fry on Thu, 2008-10-23 02:35
That is because, in the latter case, PPA 2006 put a provision in the law to allow a Direct Transfer of a QRP death benefit to a non-spouse bene’s “Inherited IRA”. It is not as if we were creating a retirement plan for a dead person.
Permalink Submitted by Alan Spross on Thu, 2008-10-23 03:01
The PLR Ed refers to is 2004 50057, released by the IRS 12/10/2004. Therefore the PLR pre dated the PPA by about 18 months. Prior to the PLR, a spousal beneficiary could only open an IRA in their own name, ie the spousal rollover. Ironically, this PLR is still not included in the tax code, and the non spouse IRA transfer might make it into the code before the spousal provision does.
That said, I find it somewhat confusing myself that this is characterized by opening an IRA in the name of a dead person. The decedent is only shown on the account because the IRS requires it to help with RMD determinations. Also, the inherited IRA had long been allowed for the spousal beneficiary on an existing IRA account.
The long awaited technical corrections act for the PPA should really include incorporation of PLR 2004 50057. But I am not confident that this will happen, and some IRA custodians still resist setting up an inherited IRA for the spousal beneficiary of a QRP.
Permalink Submitted by charles lore on Thu, 2008-10-23 03:53
I finally understand what I was missing. I had the PLR timing incorrect What a relief.. this one was driving nuts. I can now have a good nights sleep.
Thanks Alan