The Slott Report

Click to read how spousal rollovers and the RMD for year of death should work under the IRA rules.

When does the beneficiary form not trump all? IRA Technical Consultant Jeffrey Levine wrote an article this week for Producer's eSource about a court case (Cajun Industries, LLC vs. Korbert Kidder, et al.) in which a plan participant's second marriage inadvertently disinherited the children from receiving all of the retirement account savings.

Let me start out by saying there is no such thing as a hardship withdrawal from an IRA. An IRA owner generally has unlimited access to their IRA funds for any reason whatsoever (unless they are in an investment that limits their access). There is no age restriction on taking a withdrawal from the IRA. So, there is no need to prove a hardship. So, there is no need to prove a hardship. BUT, if you do take a withdrawal before you are age 59 ½, then there is an extra tax to pay.

Roth IRA questions continue to come in to advisors. Click to read this week's top question.

IRD is taxable income that was earned but not received by an individual prior to his or her death. It is taxed in the same manner to the recipient as it would have been to the decedent had he or she lived to collect it. Good examples of IRD include deferred compensation, series EE savings bonds and date of death balances in IRAs and other tax-deferred retirement plans, just to name a few.

In a recent case, the US District Court for the Middle District of Louisiana ruled that despite having previously named his three children as beneficiaries of his 401(k) plan, Leonard Kidder's 401(k) balance would pass to his new wife. The Court's ruling illustrates just how difficult it can be to remove a spouse as the beneficiary of an ERISA governed plan, such as a 401(k).

In 2010, the IRA contribution limit was the lesser of $5,000 or earned income. If you were 50 or older by the end of 2010 then an additional $1,000 catch-up contribution is allowed, for a total of $6,000. The same limits also apply to Roth IRAs, but they are not independent of one another. Click to read more about excess IRA contributions.

March Madness is upon us and we are down to the Final Four. No, we're not talking about college basketball here… we're talking rollover mistakes. The following is our Final Four list of irrevocable rollover mistakes.

This is the time of the year when missed required distributions (RMDs) for the prior year surface. Do you know what needs to be done to correct the situation?

Ed Slott has talked about "Reporting Roth IRA conversions" in all of his seminars, and The Slott Report has touched on the subject in multiple entries over the last few weeks. Ed wrote a March 20th article for Investment News about the avalanche of questions about to come in (if they haven't already) on Form 8606. It has been around for years--but it will never be as popular as this year because of two key tax law changes in 2010.