Rollovers and Successor Beneficiary Rules: Today’s Slott Report Mailbag

Thursday, May 02, 2024

By Andy Ives, CFP®, AIF®
IRA Analyst
Follow Us on X: @theslottreport

QUESTION:

My client is terminating employment and rolling over the funds from his 401(k). He was told that the funds must be rolled over to a “rollover IRA” and kept separate from any other IRA funds that he has. He already has another IRA, and he just wants to roll over the funds to that IRA. Is that allowed?

 Thanks,

 Jim

ANSWER:

Jim,

Yes, your client is allowed to roll his 401(k) into his existing IRA. There is no downside to commingling former 401(k) dollars with IRA dollars.

QUESTION:

I inherited an IRA from my brother. I have named my wife as the beneficiary on this IRA. Can she do a spousal rollover to her own IRA after my death?

ANSWER:

No, a spousal rollover is not an option. If your wife were to inherit this inherited IRA from you, that would make her a “successor” beneficiary. As a successor, she must follow the applicable rules established by the SECURE Act for deaths after 2019. Regardless of who the successor beneficiary is, the 10-year rule will apply, and the successor will continue with the same required minimum distribution (RMD) schedule as the original beneficiary in years 1 – 9. (The account must be emptied by the end of year 10.) For situations where the 10-year rule had already begun with the first beneficiary, the successor can only continue whatever time remains on the original 10-year period.

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