Rollover Rules

Submitted by Shawn Freeman on Tue, 2017-08-01 17:21

I had a client pass away in November 2016. His wife was the beneficiary on 3 separate IRA’s of $250,000 each. On 2 of these IRA’s we executed a beneficiary claim form and had the money sent to her. Immediately upon the money’s arrival we put this money into IRA’s in her name at 2 separate custodians. The 3rd IRA we did a Spousal Continuation as we wanted to make sure she had funds available to her with ZERO penalties in the event any unforeseen emergencies came about (she has plenty of monthly income.)

My question is if we do a rollover of the 3rd IRA now will this create problems based on doing the other 2 transactions in November. How does the IRS treat the execution of beneficary forms vs. rolling the money over directly.



Submitted by Alan - IRA critic on Tue, 2017-08-01 18:02

  • There is no exemptions in the one rollover per 12 month limitation for a spousal rollover. Therefore, it appears that the two 60 day rollovers done in Nov 2016 violate the one rollover limitation since the distributions were made to the wife and it is immaterial whether they are made to her as beneficiary or as owner. Accordingly, the movement of the inherited IRA funds into her own IRA should have been done by assumption of ownership and/or non reportable transfer, neither of which would be reported on a 1099R. Since the 12 month period is still running, the 3rd IRA should not be distributed except by direct non reportable transfer, but if a distribution is to be done it should wait until 12 months have passed since the date of the last distribution. Note that having an inherited IRA re titled is a non reportable transfer and is not a problem. The violation is caused by taking a 2nd reportable distribution within 12 months and rolling over a second distribution.
  • IRA custodians should be making an effort to enforce these rules, but when the custodians receiving the distributions are different, I suspect the custodians do not even ask questions regarding the one rollover limitation.
  • Even though the IRS has two 1099R forms from different IRA accounts in 2016, and rollovers were reported on line 15 of Form 1040, I am not hearing reports that the IRS is disallowing the second rollover, but they could start at anytime. 

Submitted by Ben Meyer on Tue, 2017-08-01 22:20

  • Alan, how is Assumption of Ownership performed to be a non-reportable transaction?  Would this be done by having the custodian perform an internal transfer to an account titled to the surviving spouse, or possibly by merely re-titling the account?
  • If the surviving spouse attempts to perform a direct transfer to a new custodian to an account titled as an IRA of the surviving spouse, many custodians would object or refuse since the title of the destination account would differ from the title of the decedent’s account.  So it seems that re-titling should be done first at the decedent’s custodian.

Submitted by Alan - IRA critic on Thu, 2017-08-03 00:14

  • I think there are very few IRA custodians who wish to have distributions with differing tax IDs from the same account number or have to do separate share accounting from one account. Therefore, the transfer to a new inherited or owned account is typical once the beneficiary submits required documentation from which the custodian will accept direction from the beneficiary. Of course, with qualified plans separate share accounting cannot be avoided.
  • Probably. Some transfers can be done using ACATs and others require non ACATs. I am not up to speed on the technical differences. Considering the lack of detailed guidance on spousal rollovers, there does not seem to be a problem completing the desired changes. At least no one seems to be posting about such problems.

Add new comment

Log in or register to post comments