RMD Taken in Early January and Died in April, 60 Day Rollover for Spouse?
I have a client who took his RMD from his 401k (retired, not an owner) in January. He passed away in April. The 401k custodian would not let me put the funds back because his account was frozen. The funds have now been rolled over to the spouses IRA. My thought was to have the RMD amount put back into the spouses IRA. However, this would cause a mismatch in social security numbers. Do you think it is permissible for the spouse to do the 60-day in this situation? If so, if there some IRS guidance the accountant should use to justify?
Permalink Submitted by Alan - IRA critic on Mon, 2020-08-03 21:13
A 2020 RMD taken from a 401k can be returned by 8/31 to any eligible retirement plan including an IRA. However, due to participant’s death the IRA custodian would have to rely on a few PLRs of the past that allowed an executor of the decedent to roll over (60 days in those cases) the non RMD distribution back to an inherited IRA in the name of the decedent with the same beneficiary. If client could get this far with cooperation of the IRA custodian, the surviving spouse could then elect ownership of that inherited IRA. So essentially, this long shot requires the merging of Notice 2020-51 RMD returns with some prior PLRs that allowed executors to return non RMD distributions to an inherited IRA. Acceptance of these prior PLRs is probably the greater part of this challenge, since Notice 2020-51 seems to be clear that these RMDs can be returned. The greater challenge is extending this to a decedent via executor and many custodians would be adverse to accepting such rollovers. It may not be worth the trouble, especially when you consider that 2020 is their last year to file jointly, so keeping this RMD taxed at a lower rate may make more sense than a difficult rollover, only to be taxed at higher rates in the future when surviving spouse files single.