Life and Death Planning for Retirement Benefits

166

Life and Death Planning for Retirement Benefits

2010-05059). Would these individuals be entitled to use self-certification under today’s rules? Presumably “yes” if the problem could be properly characterized as a “financial institution error” (#1) or if the reason the participant never knew about the distribution was due to, e.g., a misplaced check (#2) or his mental impairment (#6).

C. Waiver granted: Health problems, trauma . Many successful waiver requests have involved participants who were hampered physically or psychologically from carrying out the rollover by significant mental or physical health problems (of themselves or family members) or a death in the immediate family. See PLRs 2004-30039 [illness of one spouse’s parents], 2004-30040 [confusion caused by illness of two individuals, relationship unspecified], 2004-36021 [medical issues of taxpayer and spouse], 2004-12002 [hospitalization and surgery, trauma caused by deaths of family members], 2004-26020 [confusion caused by unspecified medical condition], 2004-30037 [confusion caused by moving, several medical conditions including memory problems, and a family gathering!], 2004-30038 [taxpayer’s dementia and diabetes], 2004-36021 [memory impairment, spouse’s medical problems], 2010-15042 [two surgeries and related medications impaired taxpayer’s mental abilities]. These cases, under today’s rules, would appear to qualify for self-certification under #5 (death of family member) or #6 (serious illness of taxpayer or family member). D. Waiver denied: “Short term loan” (Participant spent funds, etc.) The IRS normally refuses a waiver when the taxpayer deliberately took the distribution with the intent to spend it or invest it elsewhere ( e.g. , to qualify for Medicaid, PLR 2005-47024, or to pay expenses during a period of disability, PLR 2005-49023, or to pay a divorce obligation while waiting for a house closing, PLR 2005-44025); and/or showed no evidence of intent to roll it over until after the 60-day deadline (typically, when he discovers it is taxable; PLR 2005-48030, 2005-49017, 2004-33029, 2004-22058); or he deliberately took it, intending to spend it and then replace the funds with other funds, but he did not receive the replacement funds in time to meet the 60-day deadline (PLRs 2004-17033, 2004-22053, 2004-23038, 2004-33022, 2004-36018). The fact that the taxpayer could have (if only he’d known better!) used some funding source other than the retirement plan to cover his short-term need does not move the IRS. E.g. : a nonretirement annuity that the taxpayer could have but didn’t access because of the penalties involved, PLR 2005-46047; or credit card advances taxpayer would have used instead of the IRA distribution if only she had known how long it would take her to sell her home, PLR 2005-44025. Those taxpayers did NOT get hardship waivers. However, despite that IRS policy, here are cases where a waiver was granted to someone who used the distribution as a short-term loan:  Even if the participant did deliberately use his IRA as a “source of short-term financing,” the IRS will grant the waiver if the participant had the replacement funds, and sent them in to the IRA provider, within the 60-day time limit, if the deadline was then missed due to