Can money from a QDRO be rolled directly to the other spouses 401(k)?
By Joe Cicchinelli and Beverly DeVeny
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In this week’s Slott Report Mailbag, we answer questions on if money from a QDRO can be directly rolled over into the other spouse’s 401(k), the RMD requirements for inherited Roth IRAs, and if the 5-year rule for distributions applies to IRA beneficiaries. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. You can find one in your area here.
1.
Can the money from a QDRO be directly rolled over into the other spouse’s 401(k), or does it need to go into a rollover IRA first and then later moved to 401(k)? Thanks in advance for you help.
Answer:
The law of the plan is the law of the land. An employer plan does not have to allow QDRO assets to remain in the plan. Alternatively, they are not required to allow the distribution of those assets either until the plan participant has a triggering event. You will have to check with the plan to see what options they allow. You would only be able to move those assets to another 401(k) if the ex-spouse is working, has a 401(k) at their employer, and the plan allows for the transfer in of other 401(k) assets.
2.
My father passed away 3 years ago in October and he had a Roth IRA, my mom inherited his Roth IRA (see is 84 now). This year she got a letter from the Insurance Company saying that they could not determine her RMD amount. My question is since it is a Roth, is she required to take a distribution? She has not taken any distributions yet. It was not clear to me reading the FAQs on inherited IRA’s – is there was a difference between Traditional IRAs and Roth IRAs for RMDs?
Answer:
How is the Roth IRA titled? If it is titled as an inherited Roth IRA, then your mother should have been taking required distributions each year beginning in the year after your father’s death. But, since she is a spouse beneficiary, she has special rules. She can “treat the account as her own” which she has essentially automatically done by not taking any required distributions. The account should be retitled into her name and she should be sure to name new beneficiaries for the account.
3.
I retired at 55 in March 2009. I am 60 years old and have not taken any distributions from my IRA. I have a terminal illness and want to leave my IRA to my daughters in a stretch IRA because I will not reach age 70 1/2 before my death. Will my daughters be required to take all the money out over a 5 year period or can they take it out over their life expectancy?
Answer:
Beneficiaries who are named on the beneficiary form never have to use the 5-year rule for distributions due to death. It does not matter what the age of the account owner is at death; the named beneficiaries get to stretch distributions. As long as they split the account by December 31st of the year after your death, they can each use their own age. It is important that you review all of your beneficiary forms including IRAs, employer plans, annuities, and life insurance to ensure that your assets go to your intended beneficiaries.