Age 75 IRA owner named estate as beneficiary, is there a way his wife can roll it to her IRA?

[RayJJohnsonJr]

Recently deceased Age 75 IRA owner named estate as beneficiary, is there a way his wife can roll it to her IRA? The wife is the sole heir in the deceased's will. The death claim has not been paid to the estate yet, just waiting on a few documents.

Thank you.

Ray

[Peter Gulia]

Call Denise Appleby at 973-313-9877.

 

 

[RayJJohnsonJr]

OK, I left a message

[JOH]

Not quote me on this but I think I remember a PLR regarding this matter and it was allowed. But I could be completely wrong.

[RayJJohnsonJr]

I know I saw something that allowed it about 2017 but cannot find it anywhere.

[RayJJohnsonJr]

You got me thinking and I found this PLR. I think it says the IRA left to estate can be rolled by surviving spouse to IRA. No income tax due. Anybody got time to check it out? Its only 4 pages.

Thanks

IRS PLR 201931006 IRA Payable to Estate can be rolled over by surviving spouse to new IRA.pdf

[Luke Bailey]

7 hours ago, RayJJohnsonJr said:

You got me thinking and I found this PLR. I think it says the IRA left to estate can be rolled by surviving spouse to IRA. No income tax due. Anybody got time to check it out? Its only 4 pages.

Thanks

IRS PLR 201931006 IRA Payable to Estate can be rolled over by surviving spouse to new IRA.pdf 123.87 kB · 1 download

Right. The PLR takes a substance over form approach and treats the surviving spouse as if he or she were the designated beneficiary if his or her interest in the estate is 100%. I believe there is at least one older ruling to same effect.

[RayJJohnsonJr]

Thanks so much, Luke. 

It's my understanding that PLR’s do not apply to other taxpayers, am I correct on that? Also, if the PLR is the IRS position for these specific circumstances, do they not include it in subsequent guidance like Publication 590-B?  I cannot find this addressed anywhere on the IRS websites.

[JOH]

Ray- you are correct that the PLR only applies to that specific taxpayer but it does show IRS approach regarding the matter.

[Peter Gulia]

“[A] written determination may not be used or cited as precedent.”  Internal Revenue Code of 1986 (26 U.S.C.) § 6110(k)(3).

A letter ruling itself can be “substantial authority” for a tax treatment only if, with other conditions, the ruling is “issued to the taxpayer[.]”  26 C.F.R. § 1.6662-4 (d)(3)(iv)(A).

But a taxpayer (or a lawyer, certified public accountant, or enrolled agent who advises a taxpayer) may consider “private letter rulings and technical advice memoranda issued after October 31, 1976” in interpreting other sources of authority.  26 C.F.R. § 1.6662-4 (d)(3)(iii).

Consider also a practical point.  The surviving spouse might not be an advisor’s only audience.  An IRA custodian or insurer, if it sees the situation, might want some comfort or protection about the rightness of the surviving spouse’s tax position.

[Luke Bailey]

4 hours ago, RayJJohnsonJr said:

Also, if the PLR is the IRS position for these specific circumstances, do they not include it in subsequent guidance like Publication 590-B?

Ray, I don't think they would include it in a pub unless they had at least done a Revenue Ruling, and that's a lot of work for the IRS.

 

26 minutes ago, Peter Gulia said:

Consider also a practical point.  The surviving spouse might not be an advisor’s only audience.  An IRA custodian or insurer, if it sees the situation, might want some comfort or protection about the rightness of the surviving spouse’s tax position.

Ray, Peter beat me to it. The IRA custodian is the bigger issue. If you can convince it (and the standards among custodians vary), then the paper trail to IRS is just going to show a perfectly good spousal rollover, so the custodian is really the hurdle. If there's a lot of money involved and the custodian that the client wants insists they can't do it without a ruling, then the client would need its own PLR. Probably would want a law firm with lawyers in the state where the estate is being administered, since the property rights will be determined under state law.

[RayJJohnsonJr]

First, a shout out for Denise Appleby for returning my phone call and Peter Gulia for recommending that I call her. When she called me back she brought me up to speed on this topic and it sounds like some of the people posting here are on the same page.

 

Bottom line is: in these circumstances the deceased's IRA proceeds can go through the estate and into their surviving spouses rollover IRA without adverse tax ramifications. This causes some tricky paperwork for the tax preparer of the estate’s income tax return, since the estate is going to receive a 1099R coded that the distribution is taxable.

 

As some of you have mentioned, it's cleaner if you can get the deceased’s IRA custodian to transfer directly to the surviving spouse’s IRA. Denise goes on to say that more and more IRA custodians are agreeable to the direct transfer as the understanding of this process becomes more mainstream.

 Thanks all, I think we wrested this one to the ground.