Inherited, non-spousal IRA transfer to HSA
I am 63 and my situation has as many “answers” as people I’ve asked–so I decided to keep asking until I get the answer I want. 🙄 .
When Mom died in 2/07 at age 87 I inherited a Traditional IRA (now called Stretch or Conduit by CitiSmithBarney). I have a single-coverage high deductible HSA at Wells Fargo Bank for my Kaiser healthcare. I want to make my once in a lifetime, tax-free, trustee-to-trustee transfer from the Mom/inherited IRA to my HSA (into which I have only paid $100 in 2008). My research indicates I can do this. Wells Fargo HSA people aren’t sure, and SmithBarney (IRA) people say I cannot do this. (But I’m not going away. I have them all working on it–although I get the clear picture that they can’t figure it out so they’ll say again, “can’t be done.”
Why not? What’s the problem with just transferring funds from my IRA to HSA?
Further delays with this transfer put me at my 64th birthday so I’ll be up against the 12-month Rule for IRAs-to-HSAs–and delayed Medicare application and possible penalties about that next year. (Which I’ll risk–I’ll handle that next year when it gets here–because I want to see IRA funds go into my HSA now.)
Did anybody ever do this? Why does it seem impossible? What do you recommend?
(BTW, I found a PLR referenced at Ascensus that looks as if it may have been on point, but I don’t know about the original document–maybe you do.)
Help!! Fast!! Please!!
Permalink Submitted by Alan Spross on Tue, 2008-08-19 21:45
Well, no wonder Citigroup is in big trouble!
Att’d is a link to IRS Notice 2008-51. If you check the top of p 4 of the Notice you will see that you can make the transfer from an inherited IRA account.
http://www.treas.gov/offices/public-affairs/hsa/pdf/n-08-51.pdf
That said, you did not say exactly when you turn 65, but the eligibility period ends on the end of the same month you make the transfer, but in the following year. While you may choose not to enroll in Part B or D (I think you have a grace period), the key may be whether your HDHP will still cover you once you are eligible to enroll. I will leave that one for you to research. Good luck.
Permalink Submitted by Maggi Payment on Fri, 2008-08-22 22:50
Thanks for providing [i]the[/i] key piece of info to convice an IRS worker (the 5th one) that IRS could agree with me that CITIetc. could transfer money from my inherited IRA to my HSA. What a lengthy and time-consuming hassle/educational opportunity this became over the past few weeks. So many people and so much time were involved in this–and it isn’t over until next Friday when my HSA gets the money in time, or, if not, I have taxes and penalties to pay when I celebrate my 65th birthday next year, 9/3/09. My documents are in the hands of the uncountable unknowables of a huge bureaucracy, and I am afraid. And hopeful.
Thanks for your help. “They” had me convinced I couldn’t do such a transfer because of “The Rules,” and you turned it around for me. You are a gem!
Permalink Submitted by Alan Spross on Fri, 2008-08-22 23:02
Good, but time is short.
If you enroll in Medicare when eligible, it will be effective on 9/1/09. Therefore, the transfer needs to be done no later than one week from today, which is the last business day in August. The HSA eligibility period would then end 8/31/09 one day prior to Medicare.
Permalink Submitted by Maggi Payment on Fri, 2008-08-22 23:20
Exactly! Additionally, because my HSA is tied into my Kaiser healthcare plan, no place including IRS can or will overlook my 65th birthday next year. And if I go around telling everyone this story they will know I’m nearly 65 instead of the 55 I insinuate. So I’ll be quiet now.