Non-Spouse Beneficiary
My client, who has named his brother as his beneficiary, has an old retirement plan with Tiaa-Cref. Prior to the latest ruling, I told the client that it would be better to have the assets rolled over to an IRA so that his brother could stretch payments over his lifetime. A Tiaa-Cref representative told him that they would allow for a direct transfer for his brother, however, they haven’t provided any documentation stating that this is the case. Am I correct to assume that unless the plan has added this provision to their plan document, the client cannot count on having the stretch provision available to his brother upon his passing?
Permalink Submitted by Alan Spross on Thu, 2008-03-27 23:00
Yes, you are correct. While the IRS has issued some confusing rulings on this subject, Notice 2007-7 still applies. That notice, issued a year ago confirms that the non spousal transfer is optional for the QRP. Therefore, plan reps who indicate that the plan will be adopting the provision before it is formally written into the plan, could turn out to be incorrect. Even after they indicate the provision is in the plan, he should get either a copy or at least the reference Section # of the exact provision.
Generally, unless there are extenuating circumstances, the client himself may be better served to do the IRA transfer. The exception might be creditor concerns if he has them and does not live in a state that provides broad protection to IRAs (eg CA).