Non-Spousal inherited IRA distribution, 60 day rollover option and RMD’s

Submitted by Roci Bollmann on Wed, 2013-06-26 17:29

i inherited an IRA from my ex spouse in florida and had some problems with the company that had it, so we just took total distribution. both me and my ex spouse are over 59 1/2 but under 701/2 by ten years.
My question can i reinvest the IRA within 60 days to stop the tax liability on the full amount?
What are my options and what are my RMd’s required to take in the coming years.

thank you



Submitted by mk foss on Wed, 2013-06-26 20:30

You can roll the IRA funds into a new IRA for you within 60 days. This will be your IRA and not an inherited IRA, don’t try to open a beneficiary or inherited IRA. No distributions will be required until you are 70-1/2 but you can withdraw amounts without penalty whenever you wish.



Submitted by Alan - IRA critic on Thu, 2013-06-27 16:58

I think the prior response missed the EX spouse part. If you were not married at the time of the death, you are not considered a spousal beneficiary and cannot roll over the distribution you took. That distribution will be taxable in the year distributed. RMDs are therefore not applicable in this situation. Your marital status on the date of death is the key to your options.



Submitted by CHARLES CASANO on Thu, 2013-06-27 16:49

PARENT DIED WITH SPOUSE AS BENE. 3 DAYS LATER OTHER PARENT DIED. ON EACH IRA THERE WERE 3 DAUGHTERS AS CONTINGENT BENEFICIARIES ON EACH IRA. ALL THE DAUGHTERS ARE OVER 59 1/2. BOTH PARENTS WERE TAKING THEIR RMDS. DO THE DAUGHTERS NOW HAVE TO TAKE RMDS



Submitted by Alan - IRA critic on Thu, 2013-06-27 17:45

Yes, the daughters should create separate inherited IRA accounts no later than 12/31 of the year following the year of parent’s deaths. They are also responsible to complete the year of death RMDs in the event the parent’s did not do that. However, the right to inherit the IRA of the first parent to pass could be affected by the Uniform Simultaneous Death Act since the second parent passed within 120 hours. State law will determine how the USDA affects this situation, but if applicable it would mean the daughters would inherit that IRA directly as contingent beneficiaries. Otherwise, the estate of the second parent to die would inherit that IRA and could trigger application of a will and resulting probate. In such a case, the executor of the second parent to die might consider a disclaimer which would allow that IRA to pass to the contingent beneficiaries. Note that these issues only apply to the IRA of the first parent to pass.



Submitted by Scott Cousino on Tue, 2017-03-14 16:08

If the Year of Death RMD has not been taken by the original IRA owner when they passed away and the RMD is distributed in the same year before having the IRA split into non-spousal inherited IRAs for the beneficial owners, is the income from the RMD taxed to the deceased original IRA owner as a part of their Year of Death income? Or, should the IRA account be split into the non-spousal inherited IRAs and the RMDs taken at that point with the income added as a component of the beneficiaries Year of Death income? Thanks!



Submitted by Alan - IRA critic on Tue, 2017-03-14 16:36

The inherited IRA must first be re titled properly. Then the year of death RMD can either be completed before or after separate inherited IRA accounts are created for each beneficiary. This RMD is taxable to the beneficiaries who receive it and they all do not have to receive an equal amount. For example, if one beneficiary wants a lump sum distribution of their share, that distribution would satisfy the year of death RMD and the others need not withdraw anything. The final return of the decedent would only include distributions taken by the decedent while still living.



Submitted by Mark Kleiderlein on Wed, 2017-03-15 18:26

Non-spouse beneficiary (and her brother) inherited an IRA that was in an annuity. Advisor talked to them about inherited IRA’s but the transfer paperwork was not attached to the claim form. When the insurance company issued the checks, they were made out to the the beneficiaries. The first beneficiary tried to endorse it over to the inherited IRA account but it was rejected. Both beneficiaries then sent the checks back to teh insurance company and asked them to be re-issued to their inherited IRA accounts but the insurance company statesd that once the checks are out, they cannot undo the transaction. Does anyone know if this can be overturned and new checks issued or if a Private Letter Ruling in this case (advisor error) has possibly solved this issue and allowed the beneficiaries to place those funds in the inherited IRA accounts?  



Submitted by Alan - IRA critic on Wed, 2017-03-15 18:49

PLR exceptions allowing a non reportable transfer are extremely rare. The only one I recall is where the victim was a minor. In this case, any legal action should be directed at the advisor for damages caused by the lump sum distribution or to the insurance company if they did not follow advisor’s filed request.  Am not sure in this case how many insurance companies would have agreed to receive the check back, but they would probably do so if they felt they were fully responsible for the error. In other words, if it was to their advantage to accept the return of the checks they could certainly find a way to do that. Therefore, they must be confident this occurred due to advisor error or beneficiary error. PLRs are very costly and for this situation the chance of success is not worth the cost which could be roughly 17k including legal costs to prepare the PLR request.



Submitted by Mark Kleiderlein on Thu, 2017-03-16 23:36

Thanks for the great information. I thought so, but was hoping for a better outcome. 



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