Sep 1, 2007 12:00 PM

By Natalie B. Choate, of counsel, Bingham McCutchen LLP, Boston

Retirement benefits present unique challenges to the fiduciary of a decedent's estate. In fact, an executor may have to grapple with three scenarios in the context of a decedent's individual retirement account (IRA) or other retirement plan: (1) Does an executor have the option — or duty — to “recharacterize” a decedent's Roth IRA conversion? (2) Can or should an executor roll over plan distributions that a decedent received? And (3) what is an executor's personal liability for penalties incurred due to a decedent's failure to take required minimum distributions (RMDs)?¹ These questions don't have easy answers, so executors must be aware of their choices and the consequences that may follow.

If an individual contributes to a Roth IRA or converts a traditional IRA to a Roth IRA, he has a certain period of time to change his mind, undo the contribution or conversion, and put the money back into a traditional IRA. The effect of a so-called “recharacterization” is that the contribution is treated as if it had been made to a traditional IRA in the first place, or as if the conversion never occurred.² The deadline for a recharacterization is the extended due date of the individual's income tax return for the year of the contribution or conversion.³ If a decedent had contributed to a traditional or Roth IRA or he has converted a traditional IRA to a Roth IRA shortly before his death, an executor can exercise these recharacterization rights on a decedent's behalf.⁴ This option raises several issues.

Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

E-Newsletter Signup

2011 Trust Glossary

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50 Years Ago This Month

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50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

Conrad Teitell's Guide to Tax Benefits For Charitable Gifts

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