IRA Rollover Question

[Guest gekpc]

A CPA friend of mine (usually pretty reliable) recently told me that he heard about a court case where a designated beneficiary (not the spouse) was allowed to roll and IRA over into the designated benificiaries name. I have not seen anything on this, has anyone else?

[John Olsen]

I know of no ruling or court case in which a NON-SPOUSAL beneficiary has been allowed to roll over IRA money. While the vagaries of the IRS tempt me to suggest that nothing emanating from it is impossible, I'd bet money that no such ruling exists or is likely to exist.

The rules are pretty clear. IRC 401(a)(9)(B)(iv)(II) limits that rollover to a surviving spouse.

John Olsen

[Guest David Hammond CISP]

In cases where an IRA owner died after 1983 only a surviving spouse may rollover the IRA proceeds. For deaths prior to 1984 non-spouse beneficiaries could rollover the IRA proceeds. In rare circumstances these pre-1984 cases still can happen, but they are very seldom now. I had one with one of my bank clients last year. Through oversight of state escheat and IRS pre-age 70 1/2 survivor rules, a non-spouse beneficiary (child) was able to rollover over an IRA of an owner (parent) who died in 1983.

In normal, current day circumstances non-spouse rollovers of IRA death proceeds are not possible.

Any case citation to the contrary would be very interesting to read.

Hope this helps.