Trusts and Estates > Magazine > Notice 2008-30's Thumbs Up

May 1, 2008 12:00 PM

Notice 2008-30's Thumbs Up

By Christopher R. Hoyt

In a move that generated considerable joy and surprise,1 the Internal Revenue Service announced in Notice 2008-30 that beginning this year, a decedent's qualified retirement account can be directly rolled over into a Roth individual retirement account (IRA) for a nonspouse beneficiary, such as a child, sibling or life partner. (See “And the Answer Is … ” p. 30.) Estate planners now have an additional tool using inherited retirement accounts that may provide estate planning and tax benefits for certain nonspouse beneficiaries.

The Roth IRA is treated as an inherited IRA rather than the beneficiary's own IRA.2 Thus, amounts must begin to be distributed to the beneficiary the year after the plan participant died, and the account generally must be liquidated over a beneficiary's remaining life expectancy, which is typically about ages 83, 84 or 85.3 By comparison, a person is never required to receive a distribution from his own Roth IRA during his lifetime.4 Note that a spouse always has had more flexibility with inherited retirement assets than a nonspouse, including the ability to roll over a deceased spouse's retirement assets into his own IRA.5

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