Blog Post

Spousal IRA Rollover When Beneficiary is Estate

John Darer • Oct 14, 2018

IRS Private Letter Ruling 201839905 Provides Rollover Relief

Spousal Rollover at Death

At the time of his 2017 death, Decedent was employed by State and was a participant in a qualified plan maintained by State. Under the terms of the Plan, upon a participant’s death, Plan proceeds become payable to the participant’s designated beneficiary. However, if a participant does not have a valid designated beneficiary in effect at the time of death, the Plan provides that the participant’s benefit will be payable to the participant’s estate. Because Decedent did not have a designated beneficiary in effect at the time of his death, the entire Plan benefit is payable to Decedent’s estate.

Because Decedent died intestate, his estate would have been payable to surviving spouse and the Decedent's children under State intestacy law. However, Decedent’s children validly disclaimed their interests in Decedent’s estate in the year of Decedent’s death. Under State law, Decedent’s Children are treated as though they predeceased the decedent because of the disclaimers. As a result, the surviving spouse is the sole beneficiary of Decedent’s estate.

The Ruling

The IRS concluded in PLR201839005 that, under these circumstances, the surviving spouse may roll over the Plan benefit into an IRA set up and maintained in Taxpayer’s name provided that the rollover is completed within 60 days after the date the distribution is made from the Plan. To the extent that the amount distributed from the Plan is timely rolled over to that IRA, it will be excluded from Taxpayer’s income under section 402(c)(1) of the Code.

Despite the favorable result, it is a good idea to name a beneficiary. Read Why it is Important to Name a Beneficiary on an Annuity or Structured Settlement

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