Life and Death Planning for Retirement Benefits

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Chapter 4: Inherited Benefits: Advising Executors and Beneficiaries 181
4.1.04 Completing rollover of distribution made to the decedent
If the participant receives a distribution, but then dies before rolling it over to another plan,
can the participant’s executor complete the rollover?
Note: Thi deals with rolling over, after the participant’s death, a distribution that
occurred prior to the participant’s death. If the distribution did not occur prior to the participant’s
death, there is no rollover to “complete”—even if the participant had requested the distribution
and direct rollover prior to his death and done everything necessary to effectuate such
distribution/rollover. See PLR 2002-04038, denying beneficiaries the right to complete a deceased
participant’s rollover in those circumstances. See also
Note also: If the pre-death distribution took the form of a “direct rollover,” where the
distributing plan sent out a check payable to the transferee IRA, and the participant died before the
check got deposited into the transferee IRA, the executor can deposit the check in the transferee
IRA; see A).
The ability of survivors to roll over post-death distributions is covered in ¶ 3.2 (surviving
spouse) and ¶ 4.2 (other beneficiaries).
A. Rollovers by surviving spouses and others. Rev. Proc. 2003-16, 2003-1 C.B. 359,
appears to concede that an executor can complete a rollover of a distribution made to the
decedent prior to his death. The Rev. Proc. states that the IRS will consider requests for
waiver of the 60-day deadline applicable to rollovers if the failure to timely
complete the rollover is due to (among other possible causes listed) “death.” Thus, with an
IRS hardship waiver , an executor definitely can roll over a distribution made to
the participant, if the participant’s death prevented the participant from completing the
rollover within 60 days of the distribution.
If the decedent’s rollover can be completed by the executor more than 60 days after the
distribution date (under grant of an IRS hardship waiver), then must it not be true that the executor
can complete the rollover (without an IRS waiver) within 60 days of the original distribution?
Despite Rev. Proc. 2003-16, however, the IRS for a while permitted post-death rollovers of pre-
death distributions only when the requestor was the participant’s surviving spouse. In these PLRs,
it usually appears that the surviving spouse had been the sole beneficiary of the plan from which
the pre-death distribution was taken. See, e.g., PLRs 2004-15012, 2004-20037, 2004-18045, and
2005-20038. But requests by nonspouse executors were denied, on the grounds that only the
participant and the surviving spouse were permitted to roll over a distribution. See, e.g. , PLR 2004-
15011.
Then, in 2005, the IRS started allowing post-death rollovers of pre-death distributions by
nonspouse executors more liberally, under circumstances that clearly met the “hardship waiver”
standard. Several such rulings involved a distribution that was “unintentional” (provider error in
PLR 2005-02050 and 2007-40020; participant’s lack of mental capacity when he received the
distribution in PLRs 2005-16021 and 2007-40020; clerical error by attorney in fact in PLR 2005-
16022). Two of the rulings also involved some financial institution error (erroneous income tax
withholding in PLR 2005-02050; failure to issue 1099-R in PLR 2005-16022) as well as evidence
that the participant had attempted to complete the rollover prior to his death. Three (PLRs 2007-
17021, 2007-42027, and 2009-10069) involved individuals who died after requesting the