TAX-COURT-RULING-LIMITS-IRA-ROLLOVERS-TO-ONE-PER-YEAR-The U.S. Tax Court recently ruled that a taxpayer can only rollover (within 60 days) one IRA per year, per taxpayer – contrary to IRS publication 590 which allowed one 60 day rollover per year; per IRA – so, prior to the ruling if a taxpayer had multiple IRAs then the taxpayer could do a rollover for each IRA. This ruling will affect planning options for some who have multiple IRAs who many want to convert their existing IRAs into annuities to achieve Medicaid or Veterans benefits eligibility without taxation. If one has only a single IRA, such person can simply liquidate the IRA without withholding taxes and reinvesting the funds into such a Medicaid or VA compliant annuity. The liquidation check is usually received within five to seven business days and as long as the funds are reinvested into a tax qualified immediate annuity within 60 days, then immediate income taxes could be avoided. Since timing is of the essence in planning for Medicaid or VA since each month one fails to act could mean thousands of dollars, most clients have chosen this option.

The other option is an IRA transfer – which is done by initiating a direct plan administrator to plan administrator transfer from the current custodian to the insurance company providing the annuity. So, the insurance company obtains the funds directly from the company holding the IRA. Since the process can take two months, one would need to weigh the loss of Medicaid or VA eligibility for a couple months versus the income tax that could be incurred.

For more information on how to preserve your assets contact our Dallas office for a consultation at 214-720-0102.

No Comments

Sorry, the comment form is closed at this time.