Yet again, a ruling has been made to change the way your IRAs are handled.
The landscape of estate planning is ever-changing. We know it can be frustrating, confusing, and hard to keep track of. Luckily there are many estate planners and people that will handle your finances. It is our job to know about these changes as they happen, and then relay the information to you as it pertains to your plans.
Make sure you have an estate planner that stays up to date with all of the new rulings and changes to laws and regulations that govern estate planning. If your estate planner isn’t on top of things, it could result in a disadvantageous turn events for your carefully lain out plan.
In Bobrow v. Commissioner, the Tax Court ruled that the one-rollover-per-year rule applies to all of a taxpayer's IRAs rather than to each IRA separately.
This ruling conflicts with the prior IRS Publication 590, which previously dealt with each account separately.
Let’s say you have two traditional IRAs: IRA-1 and IRA-2. If you make a tax-free rollover from IRA-1 to a new IRA (let’s call it IRA-3), you cannot make a tax-free rollover from IRA1 to any other IRAs within 1 year of the rollover you just made.
Under IRS Publication 590, the rollover from IRA-1 into IRA-3 did not prevent you from making a tax-free rollover from IRA-2 into any other traditional IRA. IRA-2 was still accessible for making one tax-free rollover into another account or for accepting one tax-free rollover from another account.
The Tax Court has now concluded that the limitation applies to all of a taxpayer's retirement accounts. Now, regardless of how many IRAs he or she maintains, a taxpayer may make only one nontaxable rollover contribution within each one-year period.
If you feel your IRA or estate plan may be effected by this ruling, or if you haven’t had your finances reviewed in past couple of years, please get in touch with us at the Law Office of Justin M. Gilbert. We are happy to answer any questions you may have, and keep you up to date on changes that may have affected you and your estate plan.