Can we set up a Bene IRA and transfer the funds?
A client in the state of NE died without naming a beneficiary on his NPERS. Courts decided the NPERS account will payout to the estate in the form of a lump sum, of which must be paid out by the 5th anniversary of death. my client has been appt the personal representative for the estate. assuming the daughter (client) is 100% bene of the estate, can we have a bene ira established and the lump sum rolled to an outside bene ira?
Permalink Submitted by Alan - IRA critic on Thu, 2020-10-22 20:47
No. A direct rollover to an inherited IRA is only allowed for a designated (named) beneficiary, default individual beneficiary of the plan, or for a qualified trust beneficiary. An estate or estate beneficiary is not eligible for a direct rollover to an inherited IRA. In fact, the client is fortunate that the plan is not issuing an immediate lump sum distribution and will hold the account until the 5 year rule expires. If possible, client may wish to control the tax impact by seeking an approximately equal distribution each year, including the year of death. If the plan allows this, taxes could be spread over 6 tax years including the year of death.