IRA Custodian Claims Only One Rollover, per Lifetime, from Inherited IRA to Surviving Spouse’s IRA
Husband/IRA owner dies suddenly shortly after age 60.
Wife/designated beneficiary, will not be 59 1/2 til November this year.
Established Inherited IRA for wife, so she could take distributions without penalties.
Wife has short term cash need; will later have funds to pay back.
Custodian initially directed wife to –
– take distribution from wife’s inherited IRA
– roll distribution back to wife’s traditional IRA within the 60 days
Custodian later came back and stated there is only allowed ONE SPOUSAL ROLLOVER PER LIFETIME from wife’s inherited IRA to wife’s traditional IRA.
I don’t believe that is correct.
In Choate’s book, Choate recommends “roll some to spouse’s IRA, leave some in decedent’s inherited IRA” so spouse can withdraw what she needs penalty free from inherited IRA.
I believe the simple solution is for the wife WOULD HAVE BEEN to take a distribution from the husband’s IRA, and if not needed, roll that distribution over into her own IRA within the 60 days.
HOWEVER, the husband took a distribution, with the intent of paying back within 60 days. He died suddenly, before the 60 days. The custodian allowed for the money to go back into the husband’s IRA, but then promptly transferred it/rolled over into an inherited IRA for the wife..
SO — back to original question:
– can wife take distribution from wife’s inherited IRA
– roll distribution back to wife’s traditional IRA within the 60 days if not needed
– and then wait 12 months to roll over the balance from the inherited IRA to her own IRA
IS THERE A ONE SPOUSAL ROLLOVER PER LIFETIME FROM AN INHERITED IRA ?
OR – does the rollover from the husband’s IRA to the wife’s inherited IRA prevent a distribution and subsequent rollover back in (if the funds aren’t needed)?
Sorry for the complicated issues – this is a new one for me.
Permalink Submitted by Alan - IRA critic on Thu, 2017-05-18 20:36
No, there is no limit on the number of rollovers from an inherited IRA to spouse’s own IRA other than the one rollover per 12 month limitation. The one per 12 months limit might present a costly exposure however in this situation. While the distribution is from an inherited IRA, it is still reported under the SSN of the surviving spouse and therefore the IRS would likely consider that rollover to be the same as those between her owned IRAs. The distribution taken by her husband should not count since that one will be reported under his SSN as his distribution. When she does the full rollover when reaching 59.5, that one should be done by direct transfer or else she will have to wait until 12 months passes, therefore it is critical in November to be sure that a non reportable transfer can be done to her own IRA and confirmed by the custodian before requesting it. If she ends up doing a 60 day rollover before November, she must be careful with executing the total rollover as a direct transfer.