CARES Act question

Submitted by Kevin O'Hearn on Mon, 2020-04-27 12:33

Hello, I have a client who inherited her husband’s IRA account. Prior to the husband passing, he satisfied a portion of his RMD on 03/26/20. Would a 60 day rollover be able to be processed into the wife’s account per the CARES Act as an exception?

Any feedback would be greatly appreciated. Thanks.

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Permalink Submitted by Alan - IRA critic on Mon, 2020-04-27 17:54

All the CARES Act does with respect to this case is the waiver of 2020 RMDs or extend the rollover deadline to 7/15. The distribution would have been eligible for rollover, however client’s death means that the executor of his estate would have to be able to establish an inherited IRA in the name of decedent to receive a rollover. I think there has probably been an IRS letter ruling permitting this, but cannot cite one specifically. Therefore, this would probably be a real hassle with IRA custodians and since the amount is only a portion of an RMD, it is probably not worth the cost and effort to pursue it.
Instead, if surviving spouse is over 59.5 and because 2020 is the last year to file jointly, she might consider doing a partial Roth conversion from the inherited IRA and paying the taxes from the 3/26 distribution. After she begins filing as single in 2021, her marginal rate will rise.