Life and Death Planning for Retirement Benefits

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188 Life and Death Planning for Retirement Benefits
trustee transfer” of benefits either to or from a nonIRA plan except as explained a
IRA-to-IRA transfers are permitted because, under Rev. Rul. 78-406, 1978-2 C.B. 157, an
IRA-to-IRA transfer is not considered a “distribution” or a “rollover.” An IRA-to-IRA transfer is
not even a reportable event (unless combined with a Roth conversion); see IRS Instructions for
Forms 1099-R and 5498 (2010), p. 5. Thus, an IRA-to-IRA transfer avoids several of the rules and
prohibitions that apply to “60-day rollovers.” See
Although Rev. Rul. 78-406 involved an IRA-to-IRA transfer by a living participant, it is
cited by the IRS in letter rulings as being equally applicable “if the trustee to trustee transfer is
directed by the beneficiary of an IRA after the death of the IRA owner as long as the transferee
IRA is set up and maintained in the name of the deceased IRA owner for the benefit of the
beneficiary.” PLR 2007-07158; see also, e.g. , PLRs 2002-23065, 2003-49009, 2006-16040, and
2006-47030. Because an IRA-to-IRA transfer is not a “rollover,” it is not subject to the prohibition
against rollovers by a nonspouse beneficiary (see “A”).
For an IRA-to-IRA transfer in connection with:
 A post-death recharacterization of a pre-death Roth conversion, see
 The transfer of an inherited IRA out of a trust or estate to the beneficiaries of the
trust or estate, see
Here are examples of other common types of IRA-to-IRA transfers that are carried out after
a participant dies:
Transfer to another IRA provider: Father dies, leaving his IRA at ABC Bank to Daughter.
Daughter opens an “inherited IRA” at XYZ Brokerage Firm in the name “Daughter as beneficiary
of Father,” and directs ABC Bank to transfer all the funds from Father’s IRA at ABC Bank directly
into the new “inherited” IRA at XYZ Brokerage Firm. ABC issues a check for Father’s entire IRA
balance payable to “XYZ Brokerage Firm, as Custodian of Father IRA, f/b/o Daughter as
beneficiary.” (Before issuing the check, ABC may require Daughter to sign paperwork establishing
an “inherited IRA” at ABC Bank; see Daughter brings the check to XYZ Brokerage
Firm which deposits the check into her newly created “inherited IRA.”
Dividing among multiple beneficiaries: Mother dies leaving her IRA at DEF Mutual Fund Co.
to her three children, A, B, and C. Upon learning of her death, DEF Co. retitles the account
“Mother, deceased, IRA, payable to A, B, and C, beneficiaries.” That is not an IRA-to-IRA
transfer; that is simply retitling the account to reflect Mother’s death. The children then
request that the account be divided into separate accounts (see . DEF Co. creates three
separate inherited IRAs, each one titled “Mother, deceased, IRA, payable to [one of the children]
as beneficiary.” An equal-value amount of Mother’s IRA assets is moved via IRA-to-IRA transfer
to each child’s separate inherited IRA. Each IRA provider may have its own procedures for these
transfers dealing with such issues as whether it will: require the account to be converted to cash
before being divided; allow the children to agree how assets will be divvied up among the three
separate inherited IRAs instead of requiring equal allocation of each asset; and/or allow one child
to peel off his share into a separate inherited IRA even if the other children don’t participate.
C. What can go wrong. If, in the process of attempting to carry out an IRA-to-IRA transfer
of an inherited IRA, the funds are distributed to the beneficiary (i.e., money is deposited in