The long-running saga of the Department of Labor (DOL) fiduciary rule took another turn on May 22 when Secretary of Labor Alexander Acosta confirmed that there would be no delay in the June 9, 2017, implementation date. Mr. Acosta said that after careful consideration, there was no legal basis to extend the deadline.
It sounds funny to say, but death is a part of life for all of us. It’s one of the few things that all of us have in common at some point, and it’s one of the few issues that must be addressed in every plan. While every situation is unique and we all have our own goals and objectives, the overwhelming majority of married couples with IRAs and other similar accounts, such as 401(k)s and 403(b)s, name their spouse as their primary beneficiary as part of their estate plans. As such, knowing the rules for when a spouse inherits an IRA is critical for just about every married couple.
Hopefully, by now everyone has heard that IRA owners can only do one IRA-to-IRA or Roth IRA-to-Roth IRA 60-day rollover in any one-year period. This interpretation of the 60-day rollover rules was part of a 2014 Tax Court decision (Bobrow v. Commissioner, T.C.Memo. 2014-21). What was unclear from this ruling and from subsequent IRS guidance was whether or not the rule applied to a surviving spouse who inherited multiple IRAs from a deceased spouse.
You have done the right thing for years. You have diligently saved and accumulated funds in your IRA. At some point, the funds that you have put away for years must come out. Uncle Sam wants his share. When you reach age 70 ½, you must take a required minimum distribution (RMD) for that year and for every year thereafter.
It’s not a good question to be asking, and it’s certainly not the right question to be asking, but one fairly common question asked by both advisors and clients is “How are they going to know?” The “they,” they’re referring to, is the IRS. For those that have ever wondered, here are the answers to seven common “How are they going to know” questions.
This is a reminder that not all 10% early distribution penalty exceptions apply to all retirement plan distributions. Here are the three biggest mistakes that we see.
It is not unusual to inherit an IRA from someone who is not your spouse. Many people inherit an IRA from a parent or a sibling. If this is the case for you, here are six things you will want to know.
1) There Are No Restrictions Preventing a Tax Break
When you defer a portion of your salary into a traditional 401(k), the amount deferred will reduce your taxable income dollar-for-dollar. This is true regardless of how much income you (and your spouse, if applicable) have. In contrast, contributions to a traditional IRA are generally entitled to a tax deduction as well, but if your income is above certain limits and you (and/or your spouse, if applicable) are an active participant in an employer-sponsored retirement plan, then that deduction can be reduced or eliminated. Thus, in some scenarios, a contribution to a traditional IRA won’t help you reduce your current tax bill.
On April 26, 2017, the Trump administration released its highly anticipated tax reform plan. The administration said the goals of the plan include growing the economy, creating jobs and simplifying the tax code. The changes proposed are significant and if passed (and that is a big “if”) could have a major impact on your retirement planning.
In two weeks I had three trusts come across my desk that were named as the beneficiary of the account owner’s IRA. The account owner had now died and the universal question was, “Now what?”
