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Participant dies, and has both ROTH and Pre-Tax funds.

Elects to rollover ROTH fund to her ROTH IRA

Elects to rollover Pre-Tax funds to her traditional IRA.

Custodian issues 3 checks.

First check is to the beneficiary's Traditional IRA for the Pre-Tax funds.

Second check is payable to the beneficiary's ROTH IRA for amount of cumulative earnings in the ROTH 401(k) source.

Third check is payable directly to the participant in the amount of the cumulative ROTH basis.

I have a call into to custodian about why they did this but I'm wondering is the path of least resistance is to -

1 deposit the pre-tax funds to the IRA.

2 deposit the ROTH earnings to the ROTH IRA as a death benefit rollover

3 deposit the ROTH basis to the participant to the ROTH IRA as a 60 day rollover.

Note participant was not yet RMD age but beneficiary is over by a couple years, that would not impact direct rollover but would it impact her ability to do 60 day rollover? 

I mean I think the correct way to do this would be stop payment on the basis check and reissue to he ROTH IRA with correct 1099-R code. But since there will be no tax consequence either way, I'm trying to see if the work around is just simpler than dealing with custodian.

 

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