Inherited IRA--spousal options

[Felicia]

Can a spouse who inherits an IRA by will (because the deceased failed to designate a beneficiary and therefore the estate is beneficiary) establish a beneficiary IRA? roll the assets to an IRA in his/her name? If not, what are the spouse's options reagrding the inherited IRA assets? Cites would be helpful. Thanks.

[Gary Lesser]

Possibly. See PLR 200032044

The IRS allowed a widow may roll over the proceeds from her deceased husband's IRA and section 403(B) annuity into her own IRA tax-free. The husband designated his estate as the beneficiary of his IRA. On his death, his widow became the estate's sole executor and a residuary beneficiary with the power to allocate estate assets. The widow wanted to allocate both the IRA and the annuity to her residuary interest and roll the proceeds over into an IRA in her name. Because the widow had control over allocation of estate assets, the IRS ruled that she could roll over the proceeds from the husband's IRA to her own tax-free.

[BPickerCPA]

To add to Gary's reply, I strongly suggest you have all the documents reviewed by a competent pro who understands IRAs and PLR that Gary cited as well as other relevant PLRs.

You may need to go get your own IRS ruling.

[Guest Paul Vickers]

I concur with Gary and Barry. However, there are multiple PLRs on point, so I would feel safe doing it. The key seems to be that the spouse have the unfettered right to take possession of the asset.

[Gary Lesser]

I agree. And incidently, Barry Picker is such a pro.

[Bruce Steiner]

I wrote an article on this subject in the October 1997 issue of Estate Planning, in which I cited dozens of relevant PLRs. The lawyer handling the deceased spouse's estate should subscribe to this publication.

Whether the spouse can roll over the benefits turns on the particular facts. You said that the estate was the default beneficiary, but you did not explain how the spouse then inherited it through the estate.