60 Rollover of Multiple Qualified Death Benefit for Spouse

Submitted by Craig Gillen on Wed, 2023-02-22 15:41

Our client’s husband passed away with two qualified fixed indexed annuities. She submitted claim paperwork requesting lump sum withdrawal of the death benefit from both contracts, then deposited those checks into her checking account.
She is hoping to complete the 60 day rollover of those two lump sum amounts, depositing them into her own IRA; but I am assuming the one-60-day-rollover-per-year rule will apply here, meaning she will only be able to complete the rollover for one of the two withdrawals. Is there any leeway in a death claim scenario like this, or will she be stuck treating one of those two checks as a distribution instead of a rollover?
Would she have any luck appealing to the IRS for an exception? This was done on the advice of her previous advisor, but I think they missed this and it’s going to come back to bite her.
Thanks.



Submitted by Alan - IRA critic on Wed, 2023-02-22 16:01

  • The IRS does not have authority to waive the one rollover rule. But were these “qualified annuities” in an IRA or not? If not IRA annuities the one rollover limit does not apply. If these were inherited IRA annuties, the only escape hatch is to be able to roll one distribution to a non IRA employer plan, meaning she would still have to be working and her employer plan accepts IRA rollovers (except after tax amounts). Or if she has a TSP plan, the TSP will accept an IRA rollover. If that fails, and the smaller distribution becomes taxable, Plan B would be to convert it to a Roth IRA since conversions are not subject to the one rollover limit. 
  • Since the one rollover limit is mainly enforced at the custodian level, and IRA custodians frequently overlook this issue, in a case where separate 1099R forms are to be issued, these would be a red flag to the IRS if both of these were reported as rollovers. 
  • If husband was RMD age and did not complete his year of death RMD, such portion would not be rollover eligible to begin with.


Add new comment

Log in or register to post comments