Newsletter

There are now several online sites that rate how Americans will likely find their retirement experiences in a foreign country. The sites provide insightful information that ranges between security issues to medical care. At least two sites—medibroker.com and aaro.org—link users to companies that offer medical insurance, either for a short visit or permanently. The government’s site (state.gov/r/pa/ei/bgn) includes extensive information about more than 200 countries. Additional information is available from a number of private firms too: Forbes magazine and consulting firm Mercer (mercer.com/qualityofliving) both provide invaluable insights for Americans, whether they want to retire in a foreign country or simply visit one.

--Forbes, 6/28/10

Observation: Once a worker decides to retire in a particular foreign country, there are still a number of issues. Chief among those considerations are taxes and healthcare. Up to $91,500 of income earned while working abroad may be excluded from income in 2010 (see Publication 54, www.irs.gov and taxmeless.com). As for healthcare, retirees should generally sign up for Medicare Part A because it is free, even though it will not provide coverage while an enrollee is out of the country. For specific insurance questions or to buy healthcare insurance, Americans should access internationalsos.com, InsureMyTrip.com, bupa-intl.com or nationwide.com/health. For more general questions, useful sites include escapeartist.com, retireearlylifestyle.com, and internationalliving.com. See generally, Kiplinger Personal Finance, July 2010.

In a case that intertwines income tax and retirement planning, the Internal Revenue Service (IRS) has ruled that a surviving spouse who successfully asserts her statutory rights in their deceased spouse’s IRA will owe income tax on the proceeds—they may not be rolled over into another IRA. In the Private Letter Ruling, the couple lived in a community property state when the husband died, leaving three IRAs, all of which named his son as the sole beneficiary. The decedent’s widow filed a claim against the husband’s estate for her community property share, and the two sides reached a settlement awarding her a 50% interest. The court ordered the division and specifically ruled that the surviving spouse’s interest should be paid to an IRA that benefited her. She asked the Service for a ruling that the transfer be treated as a non-taxable event, but it rejected her request. Relying on I.R.C. Sec. 408, the Service concluded that rollovers from non-spousal IRAs are not permitted. In addition, any distribution to the surviving spouse from the son’s inherited IRA balances would be a distribution—to him—subjecting him to additional income tax, too.

--Private Letter Rul. 201623001

Observation: Although this case developed in a community property state, its outcome would likely be similar in a common law state. See generally, D. Markowitz, "IRS Issues Harsh Ruling Against Surviving Spouse Seeking to Roll Over Part of Son’s Inherited IRA," Trust & Estates 6-6-16.