Once-Per -Year IRA Rollover
I have a client who is the spousal beneficiary of her deceased husband’s 403(b) contracts.
There are 3 of them.
She is going to treat them as her own and have the proceeds of each sent to the money market fund in a newly established IRA.
Once the funds are all collected there, we will move the money via custodian to custodian transfer to two different custodians.
I’m okay that that final placement. It is the initial movement that concerns me.
Is there anyway that the initial movements would be considered a rollovers. If so, I would fear that any one of them might invalidate then other two and make them taxable.
I feel good that the checks will be made payable to the new custodian FBO my client.
Any help or insights would be appreciated.
Permalink Submitted by Alan - IRA critic on Fri, 2021-07-02 16:33
There are two reasons that moving the funds to an owned IRA would not be affected by the one rollover limit. First, that limit does not apply to transactions between IRAs and non IRA plans (403b), and second the funds are being moved by direct rollover and not a 60 day rollover. Of course, once these plans are moved to a single IRA, direct trustee transfers must be used to further move the IRA funds to a new IRA custodian.
If husband passed this year, 2021 is the final year for a joint tax return and the lower rates. As such, she might consider a partial conversion once the funds are in the IRA as her marginal rates are not likely to be lower when filing single. A Roth conversion is also exempt from the one rollover limit.
If she is under 59.5, she might consider a direct rollover to an inherited IRA which she could tap penalty free prior to 59.5. This does not have to be done for all the accounts, just the ones holding a balance large enough to meet spending needs prior to 59.5.
Permalink Submitted by Tim Seiders on Sat, 2021-07-03 00:23
Thank-you. This is very helpful and it puts my mind at ease.