spousal beneficial IRA indirect rollover

Submitted by Troy Frazier on Wed, 2019-06-12 19:08

a spouse under 59.5 received her deceased husbands IRA in a check and cashed it..within 60 days can she rollover the funds to a spousal beneficial IRA…



Submitted by Alan - IRA critic on Wed, 2019-06-12 20:13

Providing that the surviving spouse would not be in violation of the one rollover rule per 12 month period, she can do a 60 day rollover to an inherited IRA per PLR 2004 50057. This letter ruling is based Tax Code Sec 408(d)(3)(C) that denies rollovers of inherited IRA distributions, but exempts surviving spouses. In other words, for this surviving spouse the inherited IRA is not treated as inherited.  That said, it could still be challenging to get an IRA custodian to accept such a rollover before the 60 days expires since many of them probably think the inherited IRA can only be funded by a direct transfer.



Submitted by David Mertz on Thu, 2019-06-13 01:32

  • I don’t think that PLR 200450057 applies.  PLR 200450057 pertains to a direct rollover from a qualified retirement plan to an inherited IRA, which is certainly permitted.  The question asked above instead pertains to a rollover of a distribution from an IRA (not a direct rollover and not from a qualified retirement plan).
  • Regarding section 408(d)(3)(C), section 408(d)(3)(C)(ii) says to me only that *non-spouse* beneficiaries must treat the IRA as an inherited IRA for their benefit and cannot treat it as their own, and says nothing about whether or not a spouse is permitted to do a rollover from one inherited IRA to another.


Submitted by Alan - IRA critic on Thu, 2019-06-13 03:44

Yes, it would be quite aggressive, but the applicable code section refers to rollovers to an IRA “for the benefit of the individual”. I interpret that to include the benefit as either owner or beneficiary since the beneficiary is now the effective owner. Then it denies such rollovers for inherited IRAs, but follows with an exception for surviving spouses. I agree it says does not clearly indicate this is allowed, but does not deny it either. And the PLR does establish that an inherited IRA in the decedent’s name can be established to receive a direct rollover from a QRP. That leaves this type of rollover as the only gap in total portability for a surviving spouse. Various versions of the retirement bills being considered in Congress would even allow 60 day rollovers for non spouse beneficiaries. But if the IRA custodian will not accept a personal check from the surviving spouse as a rollover contribution to an inherited IRA, this cannot be done. For that matter, there has been considerable resistance to even recognizing the referenced PLR to receive a direct rollover from the QRP. 



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