Client is a 66 year old Male with early onset dementia. Agent had client sign 401k rollover forms to move a large 401k position into an annuity. Agent was also moving some non-qualified money into an annuity. Agent only set up one annuity, and it was set up as a non-qualified annuity. The 401k and non-qual monies were both deposited into the non-qual contract. Family found out about this several months later. The annuity company has agreed to release the funds to be transferred someplace else, where they will be put into appropriately titled accounts, ie IRA and non-qual. The annuity company is telling us that the IRS will allow the client’s diagnosis of dementia to be used as a reason that the money was put into the wrong account, and that the IRS will allow the client to make a corrective move of the money back into the IRA account as if it was a regular rollover. We are approaching a year since this all first happened.

I know the IRS has become somewhat more lenient on enforcing the 60 day rule if there has been an error in the process. Is it realistic to expect them to grant a waiver after almost a year, due to the client’s dementia?