spousal IRA rollover upon death of spouse

Submitted by Frederick Betzner on Sun, 2018-11-04 00:10

must a spousal rollover of deceased spouse’s IRA be trustee to trustee or can surving spouse receive the funds and send to his of her trustee with 60 days.



Submitted by Alan - IRA critic on Sun, 2018-11-04 03:40

  • For the surviving spouse to take a distribution they must first have the acccount retitled to them as beneficiary and the account will be reported under their SSN. They can then receive a distribution and have 60 days to roll it over to their own IRA.  The pitfall with doing it that way is that they are only allowed one rollover for all their IRAs over a 12 month period. If they have previously used up that one rollover in the last 12 months, they will have a taxable distribution on thier hands because they will not be able to complete the rollover (Refer to PLR 2017 07001). Therefore, the surviving spouse needs to be sure that they have not used up that one rollover. It does not matter that they received the distribution as the beneficiary because an inherited IRA is not treated as inherited when it comes to rollovers for a spousal beneficiary. 
  • To avoid this risk, the surviving spouse should elect to assume ownership of the inherited IRA  (they must be the sole beneficiary). The account is retitled with them as owner, but this is NOT a reportable distribution. If they want to then transfer it to their own existing IRA account or to a new account at another custodian, it can be done as a non reportable direct transfer. 
  • Now what to do if they have taken a distribution, still have the money and realize that they cannot do a rollover  –   they are stuck with the distribution and the taxes, but they could make the best of a bad situation by rolling it over to a Roth IRA and have a better quality IRA with no RMDs.  This can be done because a conversion is not subject to the one rollover rule waiting period.

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