I have a prospect who recently lost her husband and his estate was placed as Primary Bene of his IRA. His Will instructs all his assets to move to his spouse. Is their a look thru for estates as for qualified trusts? She would rather treat as her own to avoid the 5 year rule, her spouse passed after RMD age.
Can she not simply have the IRA closed and rollover funds to her own Trad IRA within 60 days. The problem I see with this is the current Custodian would probably place the 1099r under Estate Tax ID # not hers. She is having difficulty having current Custodian transfer the IRA to her own IRA. She is primary bene of Will and Executor. Essentially she is stuck logistically with the current Custodian stating they can’t move IRA to her name. Any ideas?Lastly, the wording ” look thru” has no bearing on estates. What reg allows an Estate that is prim bene of an IRA to allow the Will bene’s to establish Individual Bene IRA’s to avoid being forced to liquidate IRA in 5 years?
Per Sec 408(d)(3)(A) a rollover can only be done from an account maintained for an individual. An estate is not such an account and that is why a PLR is needed for a surviving spouse to rollover an inherited IRA of an estate. As you indicated, the 1099R would be to the estate EIN. It is not surprising that many custodians will not accept a rollover based only on PLRs obtained by other taxpayers, but some will do it. She should keep checking to find an IRA custodian that will accept such a rollover and chances are better with larger IRA custodians. The cost of a PLR has exploded in the last couple of years. As for assignment of an inherited IRA to the estate beneficiaries, this is explained in Natalie Choate’s article at the following URL which includes links for a sample letter to send to the IRA custodians: https://www.ataxplan.com/bulletin-board/notice-to-executors-and-trustees/
Thank you for the information, always appreciated!!! First and foremeost she needs to get IRA established with the estate as owner then attempt to find a custodian who would update after it was recievded at receptive Custodian?? Worse case scenarion she could continue RMD’s from estate owned IRA by reducing each year by 1 versus if able to be moved to her own IRA she could follow her own RMD table. Her being the spouse, she could move to her own and comingle???
Yes, she needs to find an IRA custodian that will accept the transfer of an estate inherited IRA, and also to subsequently allow her to assign the inherited IRA to herself as an IRA rollover based on the history of IRS PLRs authorizing exactly that. It is probably too expensive and time consuming for her to pursue her own PLR, although some custodians will ask for exactly that. If she can roll the inherited IRA over to her own IRA, then her RMDs will drop as she will be using the Uniform Table every year and she can aggregate the RMDs with her other IRA accounts as well as combine them. If she cannot acquire her own IRA then Plan B would be to settle for assignment to an inherited IRA for her as beneficiary under which her beneficiary RMDs would have to continue based on decedent’s age in year of death reduced by 1.0 for each year after the year of death.
See my articles on this in Estate Planning, http://kkwc.com/wp-content/uploads/2015/04/AR20050125164755.pdf , and Trusts & Estates, http://kkwc.com/wp-content/uploads/2015/08/IRA-Rollovers-Making-this-option-possible.pdf .
I’m happy to report that the lawyers for Trusts & Estates were able to get the website to include my byline on the article that they posted. Thanks again for letting me know about it.
Permalink Submitted by Alan - IRA critic on Tue, 2017-09-26 23:18
Passing after the RBD does not trigger the 5 year rule. RMDs use the remaining life expectancy of the decedent, but the estate will want to terminate and the inherited IRA needs to be assigned to the spouse. Further, if the spouse is the sole beneficiary under the will there are numerous IRS letter rulings allowing the inherited IRA to be rolled over to an IRA owned by the surviving spouse. That would lower RMDs considerably unless she was much older than decedent. The challenge is for the beneficiary to find an IRA custodian that will accept a rollover to the spouse’s own IRA account. Finally, there is no look through for estates as there is for qualified trusts.