Can spouse rollover to “inherited” IRA?
Spouse age 48 is sole beneficiary of deceased husband’s (age 56) QRP benefit
If spouse leaves $$ in QRP we know that any distribution to her before she’s 59 1/2 is exempt from the 10% penalty
We further know that if she “rolls” to an IRA in her name she blows the 10% penalty exemption on any distributions prior to 59 1/2
Question is: Can she roll to an “inherited”/beneficiary IRA and preserve the penalty exemption? Section 402(c)(11) on beneficiary rollovers to “inherited” IRAs is limited to non-spouse beneficiaries.
Thanks in advance to any gurus lurking on this list who can provide an answer with a citation.
Permalink Submitted by Alan Spross on Tue, 2010-11-23 18:44
Yes, she can transfer it to an inherited IRA.
For some reason Congress keeps overlooking the need for a code amendment allowing these transfers. But the IRS has approved transfers to spousal inherited IRAs in PLRs 2004 50057 and 2006 50023. Due to reliance on PLRs, some custodians may resist setting up inherited IRA registrations, but you should be able to find one with some persistance. It is worth the effort because rolling over to her own IRA will likely result in having to execute a 72t plan to avoid early distribution penalties, and these plans do not work out too well when they have to last over 6 or 7 years, in this case 11 years.