IRA owner creates a revocable trust and names the revocable trust as beneficiary of his IRA. IRA owner dies. Surviving spouse is sole trustee of the trust-beneficiary. Through an apparent misunderstanding, she ends up signing distribution forms requesting $600K be transferred to a non-retirement account established for the trust even though she intended to have the original IRA transferred to inherited IRAs established for the benefit of the trust-beneficiary (in order to minimize the required minimum distributions). Distribution request is processed by the IRA custodian. The following year, she receives a 1099-R and her CPA discovers the discrepancy. IRA custodian is unwilling to reverse the distribution because the trustee signed a distribution form.

Any suggestions on how to reduce or eliminate the income tax liability? I suggested exploring the possibility of rolling over the distribution proceeds into the spouse's own IRA by requesting a hardship exception to the 60-day rollover. It is my understanding that if the surviving spouse is the sole beneficiary and sole trustee of the trust-beneficiary, she may be able to "look through" the trust for purposes of rolling over the death distribution into her own IRA (assuming she gets the hardship exception to the 60-day rollover from the IRS). If you have any ideas or suggestions, please let me know

See my article in the October 1997 issue of Estate Planning on spousal rollovers where the spouse is not the named beneficiary. I recently obtained a favorable ruling in a similar case.

Bruce,

By recent, do you mean after the Final RMD regs was issued? If it’s a PLR could you provide us with the number?

From my understanding of the Final RMD regulations, not even a spouse is allowed to rollover the assets to his/her IRA own IRA when a trust is the beneficiary...ref Treas. Reg. 1.408-8, A-5
…The “look-thought” or “see-though” availability only allows the underlying (oldest) beneficiary of the trust to use their life expectancy to calculate RMD amounts, if the trust meets certain requirements (Treas. Reg. 1.401(a)(9)-4, A-5).

ERISA_kid… I am curious as to what “hardship” the spouse would claim…mistake or ignorace of the rules may not cut-it…still , it does not hurt to try. Please keep us posted on that