HEART Act
My retired NAVY SEAL client passed away and his widow will receive his life insurance proceeds.
Can she roll $400,000 into a Roth IRA?
Note: He was not active duty when he died.
So, to be clear, you are saying that a retiree/veteran, who is no longer covered under SGLI, perhaps this insurance is VGLI or personal other types, WOULD be eligible at death of retiree/separatee to roll these proceeds into a Roth? My understanding was that it was for active duty personnel deaths only as the only benefits listed in the HEART Act as being eligible were Death Gratuity and SGLI proceeds. – m
m – yes you are correct. The death must be while on active duty. Not sure how long active duty extends for seriously injured military staff or if such injury is the proximate cause of death if there are any gray areas.
Permalink Submitted by Alan - IRA critic on Mon, 2017-07-31 17:20
Yes, she has a great opportunity to roll over this benefit within one year of receipt to her own Roth IRA. This rollover does not count against the one rollover per 12 month limit. Once in the Roth IRA it is treated as a conversion would be except that the rollover was non taxable money and therefore can distributed without tax or penalty anytime after the rollover per the Roth IRA ordering rules. However, any Roth earnings generated on this rollover do not become tax free until the Roth is qualified at age 59.5 and after 5 years from the year of the first Roth IRA contribution or rollover.