Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

thus there is no RMD-based restriction on rolling over distributions made prior to that year. Reg. § 54.4974-2 , A-3(c); Notice 2007-7, 2007-1 CB 395, A-17(b).

F. Exceptions to the no-rollover-of RMDs rule. There are three quasi-exceptions to the no- rollover-of RMD rule: One is when a plan has an earlier required beginning date than the statute requires; see ¶ 1.4.04 . The second occurs when a surviving spouse named as sole beneficiary of an IRA is deemed to have elected to treat it as her own because of her failure to take an RMD as beneficiary; this rule in effect allows her to roll over that RMD in certain cases. See ¶ 3.2.03 (D)(3), ¶ 3.2.06 , ¶ 1.6.04 . Finally, it was possible to roll over certain RMDs under transition rules when the final minimum distribution regulations were coming into effect (not covered in this book).

Must roll over (only) same property received

A rollover cannot be used to “swap” property out of a retirement plan.

If property is distributed to a participant or surviving spouse from a QRP, and the recipient wants the distribution to be treated as a tax-free rollover to another plan or IRA (or as a valid conversion to a Roth IRA), the same property that was received from the first plan must be contributed to the recipient plan, IRA, or Roth IRA. § 402(c)(1)(C) . The participant (or surviving spouse) cannot simply substitute some other asset of equal value; if he still owns the property that was distributed from the first plan, that is what must be contributed to the same or another plan to have a tax-free rollover (or valid Roth conversion as the case may be). Rev. Rul. 87-77, 1987-2 CB 115. The only exception is that if the participant (or surviving spouse) sells the property after receiving it from the first plan, the sales proceeds are rolled over rather than the property itself; no income is reportable as a result of the sale (because it is treated as if it had occurred inside a retirement plan). § 402(c)(6) . The Code does not authorize selling distributed property and rolling over the sale proceeds in connection with rollovers of IRA distributions; it blesses only rollovers of the “amount received (including money or other property).” § 408(d)(3)(A) . Also, income earned on the property while it was outside of any retirement plan cannot be rolled over. Rev. Proc. 2003-16, 2003-1 CB 359, § 3.04. This rule applies regardless of how long the property was “outside” of any plan, even when a hardship extension of the 60-day rollover deadline is obtained ( ¶ 2.7.05 ), regardless of what hardship prevented the participant from timely completing the rollover. A participant or surviving spouse may not roll over an IRA distribution to the same or another IRA “if at any time during the 1-year period ending on the day of…[the receipt of the distribution] such individual received any other amount...from an individual retirement account...whichwas not includible in his gross income because” it wasa tax-free rollover to an IRA. § 408(d)(3)(B) . (Prior to 1978 a 3-year waiting period applied.) A. How rule applies to multiple IRAs . Under the statute, it appears that the tax-free rollover of a distribution from any IRA into the same or any other IRA prevents the tax-free rollover into an IRA of any other IRA distribution that is received less than 12 months after the first Limit of one IRA-to-IRA rollover in 12 months