Estate as an IRA beneficiary eligible for inherited IRA

Submitted by Daniel R. Cuddy on Thu, 2011-06-02 00:23

I have seen answers on here from alanoniras as to whether you are able to do a trustee to trustee transfer from a 401k plan to an inherited IRA when the estate is the beneficiary that indicates you can not. I have however seen some info from Natalie Choate that gives you a form letter you could send to the Plan Administer that gives them the exact instructions for accomplishing this. also the plan administrator is willing to move the money to an Inherited Ira FBO THE ESTATE. After reviewing this I am not sure wether I can move this clients brothers 401k into an INHERITED IRA or not. Any help would be appreciated. Thanks.

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Permalink Submitted by Alan Spross on Thu, 2011-06-02 02:31

Section 829 of the PPA included provisions for direct rollovers for non spouse beneficiaries to an inherited IRA, but ONLY for designated beneficiaries of the 401k plan. Beneficiaries of an estate are not considered as designated beneficiaries and therefore are not eligible for the rollover. See Q&A #11 in Notice 2007-7 following:

http://benefitslink.com/IRS/notice2007-7.pdf

Note that Ms. Choate’s letters for transfer are for inherited IRA accounts, not qualified plans.

Permalink Submitted by Lee Martinson on Thu, 2011-06-02 19:02

Is it still true that as it says in http://benefitslink.com/IRS/notice2007-7.pdf in Q 14 that a plan [i]may[/i] offer a direct rollover for a non-spouse beneficiary but it is not [i]mandatory[/i] for the plan to offer it?

Thanks,

Lee

Permalink Submitted by Alan Spross on Thu, 2011-06-02 19:09

Lee,
No, that portion was changed by WRERA, signed by Bush in Dec, 2008. It is now mandatory that the plan provide a direct rollover to a designated beneficiary’s inherited TIRA or inherited Roth IRA.