Predeath Distribution Cannot Be Treated as Spouse Beneficiary Assets

In two identical private letter rulings (one complete, the other with information redacted) a taxpayer requested that the IRS allow assets distributed from his deceased spouse’s IRC Sec. 403(b) plan prior to her death to be treated as received by him as a spouse beneficiary, and thus eligible for rollover.

According to the facts in PLRs 200540020 and 200540024, a 403(b) plan participant had requested payout of assets after becoming disabled, and these assets were placed in a savings account with the expectation of using them for expenses, and also to aid in qualifying for Medicaid. The individual died, and her surviving spouse asked the IRS to allow him to treat these distributed assets as if they had been received by him, and thus eligible for rollover under spouse beneficiary rules.

The IRS denied this request, noting absence in the Internal Revenue Code of any provision that would allow the agency to restore spouse beneficiary status for assets already distributed.  This fact made any waiver of the 60-day rollover limitation a moot point.

These PLRs are available at http://www.irs.gov/pub/irs-wd/0540020.pdf and http://www.irs.gov/pub/irs-wd/0540024.pdf