Last Week in La Jolla
By Andy Ives, CFP®, AIF®
IRA Analyst
Follow Us on X: @theslottreport
Last week in La Jolla, California, the Ed Slott team hosted another incredibly successful 2-day advisor training program. Nearly 200 financial professionals from across the country chose to join us for some intense IRA and retirement plan education. Topics included all things Roth, net unrealized appreciation, naming trusts as IRA beneficiaries, new SECURE 2.0 updates, QCDs, 10% penalty exception rules, creditor/bankruptcy protection rules, and the list goes on.
Between each session, participants were welcome to approach the Ed Slott team and ask any questions they might have. As expected, inquiries continued at breakfast, at lunch, in the lobby…and even into the bathroom. It’s great! This is complicated material. As presenters and hosts, we fully expect to get bombarded with questions. It is our pleasure to discuss targeted issues, ask probing questions, make recommendations, and send people down the proper path with a smile and a handshake. If it weren’t for the positive energy of each and every participant, seminars like this would not be nearly as enjoyable. Interestingly, some inquiries repeated themselves. Here is a handful of some of the more popular questions:
Do inherited Roth IRA beneficiaries have to take annual RMDs (required minimum distributions) or not? The answer is: it depends. If the Roth IRA beneficiary qualifies as an eligible designated beneficiary (EDB), then he has a choice. He can choose to take lifetime “stretch” RMDs based on his own single life expectancy, OR he can choose the 10-year payout rule. If he chooses the latter, there will be no annual RMDs in years 1 – 9 of the 10-year period, but the account will need to be emptied by the end of year ten.
When a trust or estate is the beneficiary of an IRA, do we include all the names of the trust (or estate) beneficiaries in the account title? No, that is not necessary. Only the name of the trust or estate must be included. For example: “Fred Johnson, IRA (deceased June 1, 2021) F/B/O Adam Hill, Trustee of The Johnson Family Trust, beneficiary.”
What if a person turned 73 this year, but died before taking her RMD? Does her IRA beneficiary still have to take the year-of-death RMD? In fact, there is no RMD to take. Since this person just turned 73 in 2024, but then passed away, she never made it to her required beginning date (RBD), which was April 1, 2025. Since she did not make it to the RBD, then RMDs were never “turned on.” A person takes her first RMD in anticipation of making it to the RBD. But if that person dies prior to the RBD, then there is no year-of-death RMD to take.
What’s the deal with the pro-rata rule? We welcome these questions with a smile because this topic is universally confounding. The pro-rata conversation requires an example, so here is a link to a previous Slott Report pro-rata rule article:
Additional popular questions pertained to the tax reporting of Roth retirement plan matching contributions, RMD aggregation rules, and when IRA payouts to a trust beneficiary can be impacted by the high trust tax rates. It was our pleasure to answer every inquiry to the best of our ability. We look forward to the next Ed Slott 2-day event July 18-19 in National Harbor, Maryland (near Washington, D.C.).
Interested in joining us for our next 2-Day Instant IRA Success Workshop? Find out more information and register here: https://www.irahelp.com/2-day/ira-workshop-2024-07