Annuity cash out from deceased spouse IRA
I have a client His wife had an annuity inside of her IRA. She just passed away. He took a lump sum payment of the annuity (full redemption) from his deceased wife’s IRA on the advice of his financial planner. His planner says he can roll this payment (he received a check) into an IRA within 60 days. Is this possible with a spouse’s IRA to another type of IRA? I have no other information on this transaction.
Permalink Submitted by Alan - IRA critic on Mon, 2025-02-24 18:55
Yes, it’s OK as long as the client has a 60 day rollover available under the one rollover per 12 month limit. I hope the planner did not overlook this rule. But I understand the decision to take the distribution because life insurance custodians are difficult for beneficiaries to deal with. Normally, assumption of ownership is the far better option for a sole spouse beneficiary because it eliminates the one rollover issue, is not reportable on a 1099R, and is not treated as including RMD amounts.
Another consideration is that if any portion of the distribution that has been made must be treated as the year of death RMD (if spouse passed after RBD and did not complete that year’s RMD these RMD amounts are not eligible for rollover. If they are rolled over nonetheless, the RMD amounts must be treated as excess IRA contributions because RMDs are never rollover eligible.