Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

IRA or a Roth IRA in the name of the deceased participant payable to the surviving spouse as beneficiary (see ¶ 3.2.07 ). Having converted an inherited traditional plan or IRA to a Roth IRA, the surviving spouse would have the same options as other Roth-converters to (1) recharacterize the conversion (see ¶ 5.6 ) or (2) (in the case of a 2010 conversion), include the conversion income in 2011–2012 rather than in 2010 ( ¶ 5.4.05 ). Once the inherited benefits are moved into a Roth IRA in the name of the surviving spouse they cease to be subject to any requirement of paying RMDs for the rest of the spouse’s life; while inherited IRAs (either Roth or traditional) are required to distribute RMDs, Roth IRAs are not subject to the “lifetime” RMD rules. See ¶ 5.2.02 (A). If the surviving spouse is named as beneficiary, and she survives the participant, but then she dies before taking a distribution from the inherited benefits, the surviving spouse’s death completely terminates any possibility of a spousal rollover for funds that are still inside the first spouse’s retirement plan when the surviving spouse dies. In the case of an IRA inherited by the spouse as sole beneficiary, the IRS has not allowed the executor of a surviving spouse’s estate to exercise the surviving spouse’s “personal” right to treat the deceased participant’s IRA as the now-deceased surviving spouse’s own IRA. See PLRs 9237038 and 2001-26036. And, in the case of any type of plan or IRA, there is no law or regulation that would permit the surviving spouse’s executor to roll over a distribution that such executor takes from the plan. As one lawyer put it, “She can’t roll over in her grave” (Colin S. Marshall, 1997). If a distribution was made from the decedent’s plan to the surviving spouse while she was still living, and she then died before completing the rollover of such distribution to the same or another plan, see ¶ 4.1.05 regarding her executor’s ability to complete the rollover on her behalf. There is no deadline, as such, for completing a spousal rollover. Of course, once any benefits are actually distributed to the spouse, they must be rolled over within 60 days (unless a hardship extension is obtained). ¶ 2.7 . See PLR 2009-31061 for an example of a surviving spouse obtaining a hardship waiver of the 60-day deadline. But the Code provides no specific time limit based on the participant’s death after which it becomes “too late” for the spouse to roll over distributions. See, e.g. , PLR 2002-22033, in which the participant died in 1985 and his surviving spouse was allowed to roll over the benefits to her IRA in 1997. However, even though there is no deadline as such, other events can diminish or eliminate the spouse’s ability to roll over the benefits. For one thing, if the spouse dies before initiating (or completing) the rollover, the spouse’s death may make it impossible (or very difficult) for the rollover to occur (or be completed); see ¶ 3.2.05 . Also, the minimum distribution rules ( Chapter 1 ) can reduce or eliminate the spouse’s ability to roll over inherited benefits. As long as the account remains in the name of the deceased participant, the surviving spouse must take RMDs from the account as beneficiary once she reaches her Required Commencement Date ( ¶ 1.6.04 ). RMDs cannot be rolled over; see ¶ 2.6.03 . Deadline for completing spousal rollover Rollover or election by spouse’s executor