The Bankruptcy Abuse Protection and Consumer Protection Act of 2005 (BAPCPA) simultaneously increased, in some cases substantially, the creditor protection available to retirement accounts for those who declare bankruptcy. Before implementation of the Bankruptcy Act, the protection of retirement accounts from creditors during bankruptcy had been subject to multiple rules depending on the type of [...]
When it comes to the spouse inheriting the IRA, the spouse gets special flexibility. (This should make you feel good that you’ll be dead and your spouse is still getting special advantages.) Only spouses can rollover an inherited IRA into their own IRAs. If the deceased was in the RMD status, the year-of-death distribution must [...]
There are non-tax reasons to create separate trusts for beneficiaries: Individual Life Expectancies Can Be Used. Avoid Beneficiary Disagreements. Maintain Separate Investment Strategies by Beneficiary. Beneficiaries Have Option to Choose Separate IRA Custodians. Special Needs of Certain Beneficiaries. The question is, if you have three beneficiaries, should you divide your IRA into three accounts now, [...]
Life insurance Earlier, we showed how a large IRA in a significant estate can be burdened with an 86% combined tax (federal income tax, state income tax and state estate tax). A common way to offset these taxes is by using life insurance. Since these taxes are due or become liabilities at death and life [...]
The Stretch IRA The stretch IRA is the ability of the named beneficiaries to spread required post-death distributions over their life expectancy according to the IRS Single Life Expectancy table. In English, it means that someone inheriting an IRA does not need to cash it in and pay the tax at once, but is entitled [...]
I think that few financial advisors discuss this with their clients or even understand some of these issues. The custodian that holds your IRA (bank, securities firm, insurance company) may have rules that do not agree with your desires for distributing your IRA. And their rules rule. Figure 4: Beneficiary Designation Issues Let’s consider some [...]
Suppose that the owner of an IRA or company plan dies before his or her RBD without naming a designated beneficiary? The beneficiaries must then withdraw from the account under the five-year rule. And it does not matter how much they take out during the five-year-rule period, as long as the account is depleted by [...]
According to the IRS, 43 million people have $2.7 trillion in retirement accounts. Most of this money will become IRA rollovers, and the dollars will continue to grow. Yet IRAs are neglected in the average estate plan because investors do not know they are neglected, sometimes thinking that their IRA plans are handled through their [...]
Funds in your IRAs pass outside of your will and are distributed according to beneficiary-designation forms that you fill out when you open the accounts. But unlike wills that provide details on how property should be distributed, these forms generally require that account owners name a primary and a secondary beneficiary. Other than that, the [...]
Non-spouse beneficiaries cannot do IRA rollovers as per IRC Section 408(d)(3)(C). Nor can they use the 60-day rollover rule. However, they can possibly move inherited IRAs by trustee-to-trustee transfers. But the IRA custodian might not allow such transfers. And the beneficiaries will have to accept a taxable check if they want to move their funds. [...]
