Death During a Rollover | Ed Slott and Company, LLC

Death During a Rollover

By Andy Ives, CFP®, AIF®
IRA Analyst
Follow Us on Twitter: @theslottreport

A financial advisor contacted me about her client who had recently passed away. The advisor was legitimately concerned about a rollover check received by the now-deceased individual. It had not been deposited into his IRA prior to death. Was her client’s estate stuck with a taxable distribution? Could the financial institution refuse the rollover because the person was no longer of this earth? 
 
If an IRA owner or plan participant takes a distribution, but then dies while the money is still outside of a qualified account, his executor (or those responsible for his financial affairs) may roll that distribution over. In a court case from way back in 1982, an employee took a distribution from his work plan but died before rolling it over. The court allowed his executor to roll over the distribution.
 
However, in a different scenario with different circumstances, the IRS made an opposite ruling. A plan participant established a traditional IRA and requested a direct rollover from his work plan to his IRA. But he died before all the assets were liquidated and, more importantly, prior to the money being distributed. The IRS denied the rollover, presumably because the rollover was never initiated, i.e., the assets had not yet been paid out.
 
Or course, rollovers must be completed within 60 days of receiving the distribution. If a person dies while the distribution is still in his possession, this deadline can sneak up on beneficiaries. Oftentimes, the original distribution is not even discovered by the beneficiaries until well after the 60-day period has expired. As such, numerous requests have been filed with the IRS asking for an extension of the 60-day window. The IRS has been generous and, on many occasions, allowed late rollovers due to the death of the IRA owner or plan participant.
 
In 2016, the IRS began allowing certain late rollovers if the account owner provided the receiving financial institution with a “self-certification” letter. However, “death of account owner” is not one of the IRS’s 11 acceptable self-certification excuses. (“One of my family members died” is the closest option within the 11 reasons.) While death of the IRA owner is not specifically listed, it might still pay to use self-certification since the IRS has consistently allowed such late rollovers by surviving spouses.
 
The death of any individual is a traumatic event. Thankfully, the IRS appears to have a heart when death occurs during a rollover. 
 

Content Citation Guidelines

Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.

Please be advised that prior to distributing re-branded content, you must send a proof to matt@irahelp.com for approval.

For white papers/other outflow pieces:
Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.

For charts:
Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.

For Slott Report articles:
Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

Please contact Matt Smith at matt@irahelp.com or (516) 536-8282 with any questions.

 

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.