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August 7, 2018

60-Second Read in 10 Bullet Points: Spousal Rollover of Distribution Paid to Trust Beneficiary Approved by the IRS- PLR 201831004

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By Denise Appleby,CISP, CRC, CRPS, CRSP, APA  

 

  1. An IRA owner and his spouse established a revocable trust (Trust), which held only the couple’s community property.
  2. When he died, his wife became the sole trustee of the Trust
  3. The Trust was listed as the beneficiary of his IRA, and the IRA became an asset of the Trust upon his death.
  4. In accordance with the terms of the Trust, all Trust assets were allocated to a subtrust (Survivor’s Trust). His Wife is the sole income and principal beneficiary of the Survivor’s Trust), and has unlimited rights to appoint any or all of the Survivor’s Trust property, including to herself.[1]
  5. She requested to have the IRA distributed and deposited to a non-IRAccount of the Survivor’s Trust[2].
  6. Within 60-days of the distribution, she rolled over the distributed amount to a rollover IRA maintained in her name and social security number[3].
  7. She died after submitting the rollover request.
  8. The Administrator of her estate, filed a private letter ruling (PLR) request, for the following:
    • That she is treated as the payee/distributee of her husband’s IRA.
    • That the IRA she inherited from her husband is not treated as an ‘Inherited IRA’, and is instead treated as her ‘own’ IRA
    • That the rollover she completed is a valid rollover, and
    • As a result of the rollover being valid, the distribution amount would be excluded from her income for federal income tax purposes[4]
  9. The IRS explained that, for purposes other rollover rules, she is the individual for whom the IRA is maintained.     
  10. The IRS approved the request, providing the amount was otherwise rollover eligible[5].

Reminders included in the PLR:

  • PLRs may not be used or cited as precedent. IRC § 6110(k)(3)
  • The IRS will revoke or modify a PLR retroactively if: there has been a misstatement or omission of controlling facts; the facts at the time of the transaction are materially different from the controlling facts on which the ruling was based; or, in the case of a transaction involving a continuing action or series of actions, the controlling facts change during the course of the transaction. See Rev. Proc. 2018-1, § 11.05


[1] This is a key determining factor for the IRS, when reviewing PLR requests for spousal rollovers, when a trust/estate is the named beneficiary

[2] Regular savings or checking

[3] Her own non-inherited/non-beneficiary IRA

[4] Nontaxable, but still reportable

[5] Did not break the one-per year rollover rule, any RMD amount was not included in the rollover, etc.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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