IRA Beneficiary clarification
I had a female client die at age 76. She had a traditional IRA in an indexed annuity. She named her spouse and her daughter as equal beneficiaries. The insurance company distributed the daughters portion to her inherited beneficiary IRA. They are claiming that the husband(spouse) must do the same. IS he not allowed to roll his half of the IRA into his personal IRA? Should he not be allowed a spousal rollover? When does the daughter take precedent over the the spouse?
Thank You for your clarification.
Permalink Submitted by Jose Morales on Fri, 2012-09-14 16:08
You don’t need the rep you are working with to know what they are talking about to do what you already know you are allowed to do. Thank them for the concern they are showing by trying to prevent your client’s husband from doing what they believe he is not allowed to do,and then do it anyway. It’s as simple as taking a full distribution of his portion of the deceased’s IRA and then completing a rollover to his own IRA. It will be a reportable transaction and they don’t have to agree to anything.
If you or the client’s husband have some type of hangup that this be done in a completely non-reportable way, then find a custodian that understands that the husband can treat the deceased’s IRA as his own and is willing to transfer the funds over with no 1099-R or 5498 to deal with. As you are already finding out, this option may be troublesome if you are dealing with someone with little IRA knowledge.
Permalink Submitted by Alan Spross on Fri, 2012-09-14 18:40
Also, note that any unsatisfied decedent’s year of death RMD cannot be rolled over and ideally should be distributed before the end of the year of death. This get overlooked in many cases and the IRS will not cause problems if the year of death RMD is not done until the accounts have been split. If not done by the end of the year of death however, the beneficiaries will have to file a 5329 to request waiver of the 50% excess accumulation penalty for “reasonable cause” and remove the RMD as soon as possible.