Opportunities & Pitfalls for Inheriting IRA, 401k  &  Roth-IRA   <ul><li>Sonoma County Bar Association  </li></ul><ul><li>...
Opportunities & Pitfalls  <ul><li>Opportunities  </li></ul><ul><li>Save for Retirement – tax deductible or tax free </li><...
<ul><li>Opportunities   (cont’d)  </li></ul><ul><li>IRD Income Tax deduction when estate paid Federal Estate Taxes </li></...
<ul><li>Pitfalls  </li></ul><ul><li>IRA terminated – 100% taxable  </li></ul><ul><ul><li>Participant  </li></ul></ul><ul><...
<ul><li>Pitfalls (cont’d)  </li></ul><ul><li>If 401k transferred to inherited IRA can’t use  </li></ul><ul><ul><ul><li>--Q...
Why Roth-IRA Conversion  in 2012 <ul><li>Before higher tax rates begin in 2013  </li></ul><ul><li>3.8% Surtax on Investmen...
Roth – IRAs will be  more valuable in 2013 and beyond  <ul><ul><ul><li>Participant  </li></ul></ul></ul><ul><ul><ul><ul><l...
Roth Conversions - 2012 <ul><li>Now anyone, regardless of income, can do a Roth conversion </li></ul><ul><ul><li>The $100,...
Roth-IRA vs IRA? Traditional IRA  Roth IRA   Contributions Tax Deductible  No Tax Deduction  Contributions after  Age 70 ½...
Two Types of Roth-IRAs   <ul><li>Annual Contributions </li></ul><ul><ul><li>Roth-IRA </li></ul></ul><ul><ul><li>Roth-401(k...
<ul><li>Beneficiaries – VERY IMPORTANT  </li></ul><ul><li>  Estate plan for  each  retirement account </li></ul><ul><li>  ...
Beneficiaries very Important  <ul><li>Not having a designated beneficiary for a Roth-IRA </li></ul><ul><li>  Even worse th...
<ul><li>Why it’s important --- </li></ul><ul><li>Roth Conversion $100,000  (earning 8%)  </li></ul><ul><li>  </li></ul><ul...
Beneficiary Default Election Retirement Plans What happens when there are no beneficiaries? <ul><li>Custodians for:  IRA, ...
RMD’s with multiple IRAs and 401(k)s <ul><li>Age 70 ½  </li></ul><ul><li>-RMD’s from multiple IRAs can be taken from any  ...
Don’t let the little details    “Trap” you <ul><li>Roth Conversion documents </li></ul><ul><li>  Failure to check box “No ...
Finding Cash to Pay Taxes for Roth-Conversion   <ul><li>Cash is “king” – low interest Money Market </li></ul><ul><li>Loans...
Roth Recharacterization “The Do-Over ” <ul><li>Deadline October 15, 2012 for 2011 Roth Conversion </li></ul><ul><ul><ul><u...
Roth Recharacterization “The Do-Over”  <ul><li>When can Account be reconverted back to Roth?   </li></ul><ul><li>Must wait...
Roth IRA  <ul><li>Tax Free Income -- You, Spouse  &  Grandkids  </li></ul><ul><li>No required Age 70½ distribution – you a...
Naming a Trust as Beneficiary  of IRA/401k is easy  Making it work is NOT!! <ul><li>Will custodian/Plan accept Trust?  </l...
Trust as Beneficiary  (cont’d) <ul><li>Decedent’s IRA/401k successfully  transferred   to a properly  </li></ul><ul><li>ti...
Trust as Beneficiary  (cont’d) <ul><li>Definition of trust income is important to avoid Uniform Principal  &  Income Act t...
Qualified Disclaimers  Section 2518 <ul><li>Allows for post death flexibility to change estate plan </li></ul><ul><li>Disc...
Road Map for  Beneficiaries Inheriting  401(k), IRA & Roth-IRA <ul><li>Don’t Touch  Inherited  Accounts Until You Get Help...
What Beneficiaries Need to Do  <ul><ul><li>Ask  –  Procedures to inherit account & if Roth IRA meets 5 Year Rule  </li></u...
Important Deadlines  <ul><ul><li>December 31 st   year of death  – Decedent’s RMD if age 70½ or older  </li></ul></ul><ul>...
Road Map for  Spouse Beneficiary Inheriting  401(k), IRA & Roth-IRA <ul><li>Spouse Beneficiary has special benefits – don’...
Spouse Beneficiary Special Benefits  <ul><ul><li>Spouse can transfer to own IRA/Roth-IRA  – “Fresh Start”  </li></ul></ul>...
IRA, 401(k) & Roth IRA for   participants   & their beneficiaries Take advantage of the  Opportunities and avoid the pitfa...
Upcoming SlideShare
Loading in …5
×

Opportunities & Pitfalls for Inheriting IRA, 401k & Roth-IRA: Sonoma County Bar Association, Trusts and Estates Section

1,283 views

Published on

Harry Rubins, Financial Consultant with Foothill
Securities and Rubins Financial Strategies spoke to Sonoma County Bar Association, Trusts and Estates Section 1/11/12. "Opportunities and Pitfalls:IRA, 401k, Roth IRA" for participants and beneficiaries. Please visit http://rubins401k.co25

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,283
On SlideShare
0
From Embeds
0
Number of Embeds
5
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Opportunities & Pitfalls for Inheriting IRA, 401k & Roth-IRA: Sonoma County Bar Association, Trusts and Estates Section

  1. 1. Opportunities & Pitfalls for Inheriting IRA, 401k & Roth-IRA <ul><li>Sonoma County Bar Association </li></ul><ul><li>Trusts & Estate Section </li></ul><ul><li>January 25, 2012 </li></ul><ul><li>Harry Rubins, Financial Consultant </li></ul><ul><li>Foothill Securities, Inc. </li></ul><ul><li>320 10 th St., Ste. 304 </li></ul><ul><li>Santa Rosa, CA 95401 </li></ul><ul><li>707-542-9449 www.rubins401k.com </li></ul><ul><li>hrubins@foothillsecurities.net </li></ul><ul><li>Securities & Advisory Services offered thru </li></ul><ul><li>Foothill Securities, Inc. member of FINRA/SIPC </li></ul><ul><li>CA Insurance Lic. 0728447 </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li>Ed Slott IRA Advisor Group </li></ul><ul><li> is not affiliated with </li></ul><ul><li>Foothill Securities, Inc. </li></ul><ul><li>For general information only. </li></ul><ul><li>Consult current tax code and retirement plan regulations before taking action. </li></ul>
  2. 2. Opportunities & Pitfalls <ul><li>Opportunities </li></ul><ul><li>Save for Retirement – tax deductible or tax free </li></ul><ul><ul><li>IRA & Roth </li></ul></ul><ul><ul><li>401k, PS, DB </li></ul></ul><ul><ul><li>401k with 457b can double the contribution </li></ul></ul><ul><li>Tax deferral and time creates wealth for retirement and beyond </li></ul><ul><li>Roth-IRA tax free income & no age 70½ RMDs </li></ul><ul><li>Delay 401k age 70½ RMDs </li></ul><ul><ul><li>if still working and less than 5% owner (current 401k only) </li></ul></ul>
  3. 3. <ul><li>Opportunities (cont’d) </li></ul><ul><li>IRD Income Tax deduction when estate paid Federal Estate Taxes </li></ul><ul><li>Unique Spousal Benefits </li></ul><ul><li>Participant </li></ul><ul><ul><ul><li>Spouse is greater than 10 years younger </li></ul></ul></ul><ul><ul><ul><li>smaller RMDs at age 70½ </li></ul></ul></ul><ul><li>Beneficiary </li></ul><ul><ul><li>Spousal R/O to delay RMDs to age 70 ½ </li></ul></ul><ul><ul><li>Keep as inherited IRA </li></ul></ul><ul><ul><ul><li>--Spouse younger than age 59½ - needs income, avoids 10% penalty </li></ul></ul></ul><ul><ul><ul><li>-- Decedent younger than Spouse </li></ul></ul></ul><ul><ul><ul><li>--delay RMD until decedent would have been age 70½ </li></ul></ul></ul><ul><li>Many more--- </li></ul>
  4. 4. <ul><li>Pitfalls </li></ul><ul><li>IRA terminated – 100% taxable </li></ul><ul><ul><li>Participant </li></ul></ul><ul><ul><ul><li>Exceeding the once per year R/O rule </li></ul></ul></ul><ul><ul><li>Beneficiary </li></ul></ul><ul><ul><ul><li>Non-Spouse 60 day R/O </li></ul></ul></ul><ul><li>Not updating beneficiary forms </li></ul><ul><ul><ul><li>--Any change in family status </li></ul></ul></ul><ul><ul><ul><li>--401k after second marriage </li></ul></ul></ul><ul><li>Penalties – 10 & 50% </li></ul>
  5. 5. <ul><li>Pitfalls (cont’d) </li></ul><ul><li>If 401k transferred to inherited IRA can’t use </li></ul><ul><ul><ul><li>--Qualified Disclaimer </li></ul></ul></ul><ul><ul><ul><li>--Roth conversion from IRA (non-spouse) </li></ul></ul></ul><ul><ul><ul><li>--NUA 401k company stock (capital gain taxation) </li></ul></ul></ul><ul><li>Spousal R/O may not be best decision </li></ul><ul><li>Failure to set up separate inherited accounts by Dec 31 st </li></ul><ul><li>Problems with trust as beneficiary </li></ul><ul><li>Not taking RMDs - participant & beneficiaries </li></ul><ul><li>Many more ------ </li></ul>
  6. 6. Why Roth-IRA Conversion in 2012 <ul><li>Before higher tax rates begin in 2013 </li></ul><ul><li>3.8% Surtax on Investment Income 2013 </li></ul><ul><ul><li>IRA distributions and Roth conversions are not subject </li></ul></ul><ul><ul><li>to 3.8% surtax. </li></ul></ul><ul><ul><li>These taxable distributions can raise income above threshold limits subjecting other investment income to the 3.8% tax. </li></ul></ul><ul><ul><li>The 3.8% surtax will hit certain IRA Trusts hard as it kicks in at a </li></ul></ul><ul><ul><li>much lower income ($12k in 2013). </li></ul></ul>
  7. 7. Roth – IRAs will be more valuable in 2013 and beyond <ul><ul><ul><li>Participant </li></ul></ul></ul><ul><ul><ul><ul><li>- No age 70 ½ RMD </li></ul></ul></ul></ul><ul><ul><ul><ul><li>- Distributions tax free </li></ul></ul></ul></ul><ul><ul><ul><li>Heirs </li></ul></ul></ul><ul><ul><ul><ul><li>- Inherited RMDs tax free – non-spouse </li></ul></ul></ul></ul><ul><ul><ul><ul><li>- Distributions tax free </li></ul></ul></ul></ul><ul><ul><ul><ul><li>- Avoids high trust tax rates ( 35% at $12k ) </li></ul></ul></ul></ul>
  8. 8. Roth Conversions - 2012 <ul><li>Now anyone, regardless of income, can do a Roth conversion </li></ul><ul><ul><li>The $100,000 MAGI income limit is permanently repealed - 2010 </li></ul></ul><ul><ul><li>Married individuals filing separately can now do a Roth conversion  </li></ul></ul><ul><ul><li>Participant or beneficiary </li></ul></ul>
  9. 9. Roth-IRA vs IRA? Traditional IRA Roth IRA Contributions Tax Deductible No Tax Deduction Contributions after Age 70 ½ If still working No Yes Withdrawals Before Age 59 ½ Taxable plus 10% penalty Contributions Tax-free No penalty Earnings Taxable plus 10% penalty Withdrawals After Age 59 ½ Taxable Contributions Tax-free No penalty Earnings Tax-free* No penalty *Meets 5 year rule Subject to age 70 ½ RMD Yes No
  10. 10. Two Types of Roth-IRAs <ul><li>Annual Contributions </li></ul><ul><ul><li>Roth-IRA </li></ul></ul><ul><ul><li>Roth-401(k)/Roth-403(b)/Roth 457(b) – salary deferral </li></ul></ul><ul><li>Conversion from IRA, SEP-IRA, Simple-IRA, 401(k)/403(b) to Roth-IRA </li></ul><ul><li> Conversion From </li></ul><ul><li>Owner IRA Qualified Plan </li></ul><ul><li>Original Owner YES YES </li></ul><ul><li>Inherited by Spouse YES YES </li></ul><ul><li>Inherited by non-spouse NO * YES </li></ul><ul><li>* exception to everyone can do a Roth Conversion </li></ul>
  11. 11. <ul><li>Beneficiaries – VERY IMPORTANT </li></ul><ul><li>  Estate plan for each retirement account </li></ul><ul><li>  Requires account owner to complete beneficiary forms </li></ul><ul><li>and update as needed </li></ul><ul><li>Requires beneficiary to take action by Sept 30 th & Dec 31 st </li></ul><ul><li>in the year following death (Oct 30 th for trust by trustee) </li></ul><ul><li> To maximize the benefits of inherited IRA, 401(k) or </li></ul><ul><li> Roth-IRA as a designated beneficiary </li></ul><ul><li> </li></ul>
  12. 12. Beneficiaries very Important <ul><li>Not having a designated beneficiary for a Roth-IRA </li></ul><ul><li> Even worse than not having one for an IRA </li></ul><ul><li>  </li></ul><ul><li> Inheriting IRA without a designated beneficiary </li></ul><ul><li>  Death before age 70½ RBD* -- 5 year rule   </li></ul><ul><li> Death after age 70½ RBD </li></ul><ul><li> -- Use decedent’s remaining single life expectancy </li></ul><ul><li> (age 72 = 15.5 yrs & substrate 1 for each yr) </li></ul><ul><li> </li></ul><ul><li> Inheriting Roth-IRA with no designated beneficiary </li></ul><ul><li>  Roth IRA has no age 70 ½ Required Minimum Distribution(RMD) </li></ul><ul><li>  </li></ul><ul><li> - No RBD so only 5 year rule </li></ul><ul><li>   </li></ul><ul><li> *Required Beginning Date – April 1 st year following year age 70½ </li></ul>
  13. 13. <ul><li>Why it’s important --- </li></ul><ul><li>Roth Conversion $100,000 (earning 8%) </li></ul><ul><li>  </li></ul><ul><li>Inherited by 10 year old grandchild—not designated beneficiary </li></ul><ul><li>  </li></ul><ul><li>Loss of tax free growth and income </li></ul><ul><li>  </li></ul><ul><li>After 5 years = $146,932 </li></ul><ul><li>  </li></ul><ul><li>Not what the parents had in mind </li></ul><ul><li>when they converted and paid taxes </li></ul><ul><li>  </li></ul><ul><li>When it could have been a Designated beneficiary </li></ul><ul><li>72.8 life expectancy = $4.8 million TAX FREE ! </li></ul>
  14. 14. Beneficiary Default Election Retirement Plans What happens when there are no beneficiaries? <ul><li>Custodians for: IRA, Roth-IRA, SEP-IRA, Simple IRA </li></ul><ul><li>Mutual Funds </li></ul><ul><li>American -- Spouse, children/grand kids, to the estate </li></ul><ul><li>Franklin -- Spouse, to the estate </li></ul><ul><li>Vangard -- Spouse, to the estate </li></ul><ul><li>Brokerage </li></ul><ul><li>Pershing -- Spouse, children per stirpes, to the estate </li></ul><ul><li>Schwab -- To the estate </li></ul><ul><li>TD Ameritrade -- Spouse, children, to the estate </li></ul><ul><li>Qualified Plans -- 401(k), 403(b), Profit Sharing </li></ul><ul><li>Plan Document ? ? ? </li></ul>
  15. 15. RMD’s with multiple IRAs and 401(k)s <ul><li>Age 70 ½ </li></ul><ul><li>-RMD’s from multiple IRAs can be taken from any combination (one or all) </li></ul><ul><li>  </li></ul><ul><li>- RMD’s from multiple 401(k)s must be taken from each one - 403(b) is an exception (one or all) </li></ul><ul><ul><ul><li> -Still working and less than 5% owner -- no 401(k)RMD </li></ul></ul></ul><ul><li>RMD’s from inherited IRA, 401(k)/403(b) </li></ul><ul><li>-Inherited IRA – take from each decedent’s IRA </li></ul><ul><ul><ul><li>(one or all same decedent) </li></ul></ul></ul><ul><ul><ul><li>-Inherited 401(k) – take from each decedents 401(k) </li></ul></ul></ul><ul><ul><ul><li>- Inherited 403b is an exception (one or all same decedent) </li></ul></ul></ul>
  16. 16. Don’t let the little details “Trap” you <ul><li>Roth Conversion documents </li></ul><ul><li> Failure to check box “No Federal Tax withholding” </li></ul><ul><li>  </li></ul><ul><li> Automatic 10% Federal Tax will be withheld plus any State Taxes </li></ul><ul><li>  </li></ul><ul><li> Taxes withheld cannot be corrected or recharacterized </li></ul><ul><li>   </li></ul><ul><li> Always confirm converted amounts are deposited and make it into the correct account – “Follow the Money” </li></ul><ul><li>  </li></ul><ul><li> 60 day R/O – if late all taxable and lost Roth opportunity </li></ul><ul><li> may have 10% penalty* </li></ul><ul><li>*Under age 59½ </li></ul><ul><li>  </li></ul><ul><li> Trustee transfers – finding out when doing tax return </li></ul><ul><li> may be too late to correct errors </li></ul><ul><li> </li></ul>
  17. 17. Finding Cash to Pay Taxes for Roth-Conversion <ul><li>Cash is “king” – low interest Money Market </li></ul><ul><li>Loans – another source of cash </li></ul><ul><li>- Home equity line of credit </li></ul><ul><li>- Cash value life insurance </li></ul><ul><li>- 401(k) loan </li></ul><ul><li>Capital losses - $3,000 per year </li></ul><ul><li>Age 70½ RMDs </li></ul><ul><li>Charitable contribution strategy </li></ul><ul><li>Donate stocks with unknown cost basis </li></ul><ul><li>Life insurance paid to beneficiary </li></ul><ul><li>  </li></ul>
  18. 18. Roth Recharacterization “The Do-Over ” <ul><li>Deadline October 15, 2012 for 2011 Roth Conversion </li></ul><ul><ul><ul><ul><li>- even if 2011 tax return was filed </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Must be trustee to trustee transfer </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Transfer back to any IRA </li></ul></ul></ul></ul><ul><ul><ul><ul><li>401(k) -> Roth -> IRA </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Treated as if funds never left IRA </li></ul></ul></ul></ul>
  19. 19. Roth Recharacterization “The Do-Over” <ul><li>When can Account be reconverted back to Roth? </li></ul><ul><li>Must wait until later of the calendar year after the conversion or more than 30 days after the recharacterization. </li></ul><ul><ul><ul><li>Roth Roth </li></ul></ul></ul><ul><li>Conversion Do-Over Conversion </li></ul><ul><li>2011 2012 31 days </li></ul><ul><li>2011 2011 2012 </li></ul>
  20. 20. Roth IRA <ul><li>Tax Free Income -- You, Spouse & Grandkids </li></ul><ul><li>No required Age 70½ distribution – you are in control! </li></ul><ul><li>Make Roth-IRA contribution after Age 70½ (if still working) </li></ul><ul><li>Distributions won’t increase tax on Social Security, Medicare </li></ul><ul><li>premiums, AGI that affect AMT or 3.8% surtax in 2013 </li></ul><ul><li>Huge Estate Planning Benefits </li></ul><ul><li>Beneficiary – RMD tax free income for life (non-spouse) </li></ul><ul><li>Best asset for trusts – avoids high trust taxes </li></ul><ul><li>35% Fed tax for trust income above $11,650 (2012) </li></ul><ul><li>Remove uncertainty and worry of future higher tax rates </li></ul>
  21. 21. Naming a Trust as Beneficiary of IRA/401k is easy Making it work is NOT!! <ul><li>Will custodian/Plan accept Trust? </li></ul><ul><li>Is Trust listed as beneficiary on each account? </li></ul><ul><li>Trust document specifically drafted for IRA/401k? </li></ul><ul><li>Trust meets 4 requirements to qualify as “stretch IRA” </li></ul><ul><ul><ul><li>Valid under state law </li></ul></ul></ul><ul><ul><ul><li>All Trust beneficiaries are persons and identifiable </li></ul></ul></ul><ul><ul><ul><li>Irrevocable upon death </li></ul></ul></ul><ul><ul><ul><li>By October 30 th year following death, custodian/plan received Trust documents sent by Trustee. </li></ul></ul></ul><ul><li>All beneficiaries will use oldest beneficiary’s life expectancy for RMDs. </li></ul>
  22. 22. Trust as Beneficiary (cont’d) <ul><li>Decedent’s IRA/401k successfully transferred to a properly </li></ul><ul><li>titled inherited IRA – not to the Trust </li></ul><ul><li>Joe Smith deceased FBO Art Brown trustee Smith Trust </li></ul><ul><li>RMD’s are paid out of the inherited IRA to the Trust for distribution </li></ul><ul><li>Avoid having IRA Trust pay decedents debts and expenses as trust </li></ul><ul><li>may be ineligible for “stretch IRA” </li></ul><ul><li>Is the right type of Trust named? </li></ul><ul><ul><ul><li>-Conduit (pass through) Trust </li></ul></ul></ul><ul><ul><ul><li>-Discretionary (accumulation) Trust </li></ul></ul></ul><ul><li>Who are the trust beneficiaries? </li></ul><ul><ul><ul><li>-Conduit trust only includes primary beneficiary </li></ul></ul></ul><ul><ul><ul><li>-Discretionary trust includes both primary & remainder beneficiaries </li></ul></ul></ul>
  23. 23. Trust as Beneficiary (cont’d) <ul><li>Definition of trust income is important to avoid Uniform Principal & Income Act that defines RMDs (90% principal & 10% income) as only 10% of RMD is distributed. </li></ul><ul><li>Is trustee a family member or bank? Does trustee understand their fiduciary obligations and all the many complex IRA trust issues? </li></ul><ul><li>If a Special Needs Trust, creditor protection or control for many years is not needed consider a custodial beneficiary. </li></ul><ul><ul><li>Sally Jones custodian FBO Mark Smith UTMA/CA to age 25. </li></ul></ul>
  24. 24. Qualified Disclaimers Section 2518 <ul><li>Allows for post death flexibility to change estate plan </li></ul><ul><li>Disclaimer is written document prepared by attorney and received by custodian/plan within 9 months of date of death </li></ul><ul><li>Primary beneficiary can disclaim any or all of inherited IRA/401(k) to named beneficiaries </li></ul><ul><li>Individuals making disclaimer must not have accepted or transferred any of the decedent’s IRA/401(k) ( Exception decedent’s RMD) </li></ul>
  25. 25. Road Map for Beneficiaries Inheriting 401(k), IRA & Roth-IRA <ul><li>Don’t Touch Inherited Accounts Until You Get Help! </li></ul>
  26. 26. What Beneficiaries Need to Do <ul><ul><li>Ask – Procedures to inherit account & if Roth IRA meets 5 Year Rule </li></ul></ul><ul><ul><li>Name – New Beneficiaries - Very Important! </li></ul></ul><ul><ul><li>Take – Decedent’s remaining RMD if age 70½ or older </li></ul></ul><ul><ul><li>Ask if 401k has Company Stock, Roth 401k or after tax contributions; what is procedure for Non-Spouse Beneficiary transfers & conversion to inherited Roth-IRA? </li></ul></ul><ul><ul><li>Ask if Federal Estate Taxes were paid </li></ul></ul><ul><ul><li>Transfer to properly titled inherited account (no 60 day R/O) </li></ul></ul><ul><ul><ul><li>Mary Smith deceased (DOD 11/4/10 ) FBO Jane Smith Beneficiary </li></ul></ul></ul>
  27. 27. Important Deadlines <ul><ul><li>December 31 st year of death – Decedent’s RMD if age 70½ or older </li></ul></ul><ul><ul><li>9 Months after death – Qualified Disclaimer & Fed Estate Taxes deadlines </li></ul></ul><ul><ul><li>Year Following Death </li></ul></ul><ul><ul><ul><li>--September 30 th – Qualify for stretch IRA & cash out charitable bequests </li></ul></ul></ul><ul><ul><ul><li>--October 30th – Trust documents received by IRA custodian/Plan </li></ul></ul></ul><ul><ul><ul><li>--December 31 st – Separate accounts for multiple beneficiaries </li></ul></ul></ul><ul><ul><li>Complete company stock transfer within calendar year </li></ul></ul><ul><ul><li>Transfer out of 401k and complete Roth conversion </li></ul></ul><ul><ul><li>Start Inherited RMD (non-spouse) </li></ul></ul><ul><ul><li>Note: Spouse Beneficiary has special benefits – don’t lose them ! </li></ul></ul>
  28. 28. Road Map for Spouse Beneficiary Inheriting 401(k), IRA & Roth-IRA <ul><li>Spouse Beneficiary has special benefits – don’t lost them! </li></ul>
  29. 29. Spouse Beneficiary Special Benefits <ul><ul><li>Spouse can transfer to own IRA/Roth-IRA – “Fresh Start” </li></ul></ul><ul><ul><ul><li>--After qualified disclaimers and 401k company stock transfers </li></ul></ul></ul><ul><ul><ul><li>--Can transfer at anytime so can keep as inherited IRA when income is needed (no 10% penalty)until spouse is age 59 ½. </li></ul></ul></ul><ul><ul><li>Delay RMD Distributions </li></ul></ul><ul><ul><ul><li>--For transfers to own IRA until spouse is age 70½ </li></ul></ul></ul><ul><ul><ul><li>--For inherited IRAs*, until decedent would have been age 70½ </li></ul></ul></ul><ul><ul><ul><ul><li>*Only if spouse was sole beneficiary </li></ul></ul></ul></ul><ul><ul><li>Recalculate Life Expectancy – For account registered as inherited IRA * </li></ul></ul><ul><ul><ul><li>--Spouse can recalculate life expectancy after 1 st year so age 70 ½ RMDs are smaller and last longer than for a non-spouse </li></ul></ul></ul><ul><ul><ul><li>* only if spouse was sole beneficiary Note: Roth IRA – no RMDs or 10% penalty </li></ul></ul></ul><ul><ul><li>If all this seems complicated – it is! </li></ul></ul><ul><ul><li>This is not the time to “do it yourself” </li></ul></ul>
  30. 30. IRA, 401(k) & Roth IRA for participants & their beneficiaries Take advantage of the Opportunities and avoid the pitfalls

×