IRA Rollover

IRS Liberalizes IRA Rollover

The IRS continues a trend of liberalizing rollover rules for IRAs.  This case involved the decedant (husband) who owned multiple IRAs and designated his own estate as beneficiary.  He later married and did not change his IRA Beneficiary Designations prior to his death.  This typically creates problems for the surviving spouse, who generally would otherwise rollover the decedent’s IRAs into his or her own IRA without suffering penalties.  When the estate is the designated beneficiary, the surviving spouse is generally not allowed to rollover the IRA assets.

However, in this case, the surviving spouse (wife) intended to exercise her right of election directly against her husband’s IRAs and then rollover the IRA assets into her own IRAs.  The IRS ruled that “where a spouse exercises a right of election to the extent that the elective share contains IRA assets, the IRA assets will be treated as having been received by the surviving spouse directly from the decedent and not from the estate.”  This ruling has significant impact.  Had the IRS ruled that the wife must exercise her right of election against the husband’s estate to obtain his IRAs, she would not have been able to rollover those assets into her own IRA, tax-free.

Source: PLR 200027060 7-10-2000