Decedent 403(b) to Decedent IRA??
My question asks whether I can make a Trustee to Trustee transfer of a decedent 403(b) to a Decedent IRA w/o creating any adverse tax consequences. Here is the fact pattern:
1) Original participant was a contributor to a 403(b) account. He died. His surviving spouse was beneficiary. She disclaimed the 403(b) to her biological son thereby creating a decedent 403(b). The son has been making w/d from the account annually as per his life expectancy.
2) My firm has been asked to manage the assets inside the Decedent 403(b). Our custodian will only accept the account if it is a Decedent IRA. I would like to perform a Trustee to Trustee transfer from the Decedent 403(b) into a Decent IRA. Can I do this? Does this create any negative tax consequences? I cannot find any specific legal authority on this. Please post controlling authority if you have it. Thanks!
Permalink Submitted by Alan Spross on Wed, 2010-05-05 23:06
You can do the transfer.
This was first authorized in Sec 829 of the PPA in 2006.
Sec 829 was further clarified in Notice 2007.
And finally, WRERA (signed 12/08) made the transfer mandatory. The applicable provision that did that is copied below and notes the Sec of the tax code that applies:
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Allow rollovers by nonspouse beneficiaries of certain retirement plan distributions (Act sec.
829 and Code sec. 402(c)(11), (f)(2)(A))
The Act permits rollovers of benefits of nonspouse beneficiaries from qualified plans and
similar arrangements. The provision clarifies that the current law treatment with respect to a
trustee-to-trustee transfer from an inherited IRA to another inherited IRA continues to apply.
Under the provision, effective for plan years beginning after December 31, 2009, rollovers by
nonspouse beneficiaries are generally subject to the same rules as other eligible rollovers.
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Also, note that the transfer also includes the option of an inherited Roth IRA as a taxable conversion. RMDs still apply as the Roth is inherited.