daughter needs advice assisting mother with inherited IRA

My father passed away in Dec ’06. He named his spouse’s (my mother) trust as beneficiary of his IRA. In Feb ’07 the IRA was moved out of his name and into a BDA-IRA Revocable Living Trust of (my mother). She is the trustee of her trust and sole beneficiary. Her trust becomes irrevocable upon her death.

Can the IRA as it now stands be rolled over into my mother’s own IRA?

Is it necessary to receive a PLR before any action is taken?

The IRA custodian wants a letter from the lawyer who drew the trust, stating that the my mother’s trust meets the see throught trust rules and instruction on RMD. They also want my mother to sign a hold harmless letter.

Her lawyer wrote a letter stating that she could move the funds of the IRA and not have to start taking distributions until she is 70 and 1/2. Then upon further clarification needed by the IRA custodian, she advised us that the trust did not become irrevocable upon my father’s death therefore my mother would have to withdraw the IRA over a five year period. My mother and I then met with the lawyer who offered to write a PLR on our behalf and said she should not sign a hold harmless letter.

We do not know where to go for advice and no one seems to know what to do with our situation. Accountants have told us that she can roll over the IRA into her own IRA without a PLR.

What should we do? Where can I go to read more information?



Without seeing the documents, it’s not possible to respond other than to suggest that you consult with tax/estates counsel. For example, it’s not clear what you mean by “the IRA was moved out of his name and into a BDA-IRA Revocable Living Trust of (my mother).”

For background, you may want to take a look at my article on spousal rollovers through trusts: http://www.kkwc.com/docs/AR20050125164755.pdf



Thank you. I was trying to say that the IRA was no longer in the original owner’s name but was registered as a beneficiary designated account. The registration of the IRA is now “Inherited IRA-(my mother’s name) Revocable Living Trust.



Now I understand. Your father named your mother’s revocable trust as the beneficiary, instead of naming your mother as the beneficiary.

Since your mother can withdraw all of the assets of her revocable trust, your mother should be able to get a private letter ruling allowing the rollover. For more on that, see my article on this subject: http://www.kkwc.com/docs/AR20050125164755.pdf

Your mother should consult with an attorney (other than the one who had your father leave his IRA to your mother’s revocable trust instead of your mother).



Thanks again.

I was hopeful that since her trust becomes irrevocable upon her death it would be a qualified beneficiary and we wouldn’t have to incur the cost of a PLR….any chance?



Your mother can attempt to do the rollover without a ruling. But the custodian may not allow it. Even if the custodian allows it, her income tax return may not match the custodian’s reporting. Even so, your mother may be able to satisfy the IRS on audit, especially given the number of favorable rulings thus far. But it may not go so smoothly. Private letter rulings are only binding on the IRS with respect to the taxpayers to whom they are issued. If she gets her own ruling, she will have certainty.



I think we will go for a PLR! You have been a blessing. May God bless you and keep you and make his face shine upon you.



Without making any claims as to whether your mother would be allowed, from a regulatory standpoint, to rollover the funds to her own name…

She does not have to complete the rollover at the same financial institution. If everyone on her side is absolutely sure that she has the right to rollover these funds into her own name then why doesn’t she just close the IRA out and then rollover the funds to another financial institution in her own name?



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