TSA to an IRA from deceased spouse
client had a TSA with his ministry
He passed away and wife was listed as primary beneficiary
we are doing a rollover/transfer directly from the TSA to her IRA
The company who holds the TSA is sending all these letters out that the transfer is taxable and notices of Ombudsman required notice.
Am I missing something?
This is a non-taxable event (transfer a TSA from the deceased husband to his wifes own IRA), correct?
Thank you,
Douglas
Permalink Submitted by Alan - IRA critic on Tue, 2018-07-31 00:25
Perhaps they think they are making a distribution rather than a direct rollover. Were the forms completed correctly? As for a direct rollover to a surviving spouse’s IRA, that is clearly allowed in Sec 402(c)(9). A direct rollover is needed for avoid 20% withholding. A direct rollover is a two part process, first a distribution and then the rollover and must be reported on the 1099R as a direct rollover code G. Seems pretty basic for the plan administrators to not understand these things.
Permalink Submitted by Douglas Bauerband on Tue, 2018-07-31 20:10
a. they said they are sending a check to her IRA company directly.b. however they are going to send two 1099’s…one for the lump sum and another one for the death claim interestc. They are sending one check to her IRA company.My question is:1. it doesn’t matter what the interest was earned in the TSA…it still goes down as a rollover/transfer correct?She will not have to pay taxes on the interest, which is the way their letter seems to state.thank youDouglas
Permalink Submitted by Alan - IRA critic on Tue, 2018-07-31 20:32
Was there perhaps a life insurance benefit that was not part of the TSA? In that case a 1099 INT would be issued, but of course such life insurance interest post death would not be eligible for rollover. If this is just a TSA with gains after the date of death, the 1099 INT would not apply. But if they do issue a 1099 INT, the amount will be taxable. The plan seems to be mixing apples and oranges here, OR the plan might have some unique features included that they should be able to explain.