decedent IRA / 60 day rollover | Ed Slott and Company, LLC

decedent IRA / 60 day rollover

The sole direct beneficiary of an IRA (adult son) was told on a recorded line of the existing custodian that he could execute a 60 day rollover. The existing custodian established a decedent IRA. Then the custodian recently mailed him the check. He since learned that the 60 day rollover doesn’t apply to decedent IRAs. The estimated tax is approx $50k. What are all his options at this time to mitigate the cost to him? Private letter ruling, bring suit against the custodian, or any other options?

Legal action against the custodian is the only option, but does he have proof of the custodian's erroneous advice? The IRS does not have the authority to allow a rollover of a non spouse beneficiary distribution (see PLR 2005 13032). Perhaps Congress will change this with additional portability legislation at some point, but it won't be retroactive.

The Administration's Revenue Proposals for Fiscal Year 2013 include a proposal to allow 60-day rollovers for nonspouse beneficiaries, but effective prospectively only. However, this has not been enacted.

As arguably the most costly and common error made with IRA money, it would be a positive change to eliminate the mandatory transfer requirement for non spouse inherited IRAs. Perhaps one of the justifications for the current restrictions is that a non spouse beneficiary cannot roll into their OWN IRA account and mandatory transfers serve to eliminate this error. If a 60 day rollover of non spouse inherited money is approved, there will have to be some control to prevent beneficiaries from rolling the money into an existing or newly created owned IRA. Without some kind of control, there will be many situations where the new IRA is not titled as a beneficiary IRA.

Talk to the IRA custodian first. From my experience, it may just mean talking to the right person, and helping him/her understand. Sometimes they need a little help to make them understand.

Find members of Ed Slott's Elite IRA Advisor GroupSM in your area.
We neither keep nor share your information entered on this form.

I agree to the terms and services:

You may review the terms and conditions here.