June is Pride Month. While celebrating, same-sex couples may want to take this opportunity to consider plans for their retirement accounts. Since the SECURE Act and SECURE 2.0 have overhauled the rules, it may be time for a new strategy. Here are 5 retirement account planning tips for same-sex couples.
Question:I have a large amount of stock from a previous employer in my 401(k). I had been reinvesting the dividends for the last 23 years since I left the company. I no longer want to reinvest the dividend to buy additional shares. Most of the stock has appreciated considerably since I bought it.
A couple of years ago I was asked what the tax consequences are when a Roth IRA is split in divorce. After a pause, I answered honestly: “I have no idea…but will find out.” In fact, there is no specific guidance in the Tax Code or in the regulations on how to handle such a transaction.
Although the U.S. divorce rate is in a steady decline, it’s still one of the highest in the world. And with divorces often come QDROs – “qualified domestic relations orders.” A QDRO is a state court order obtained by divorcing couples that requires a company plan to pay a portion of the benefit of the spouse participating in the plan to the other spouse.
Question:I inherited an IRA from my brother back in 2019. I have been taking required distributions from it each year. Can I do a qualified charitable distribution from this inherited IRA this year to satisfy the required distribution requirements from this IRA?
Probably the biggest advantage that a spouse beneficiary of an IRA has over other beneficiaries is the ability to do a spousal rollover. Only a spouse beneficiary can do a spousal rollover. Nonspouse beneficiaries do not have this option. With a spousal rollover, inherited retirement account funds become the spouse beneficiary’s own.
For deaths in 2020 or later, we know that a non-eligible designated beneficiary (NEDB) of an IRA is subject to the 10-year rule. Meaning, the account must be emptied by the end of the tenth year after the year of death. In its proposed SECURE Act regulations, the IRS takes the position that when death occurs on or after the required beginning date (RBD – generally April 1 of the year after a person turns 73), an NEDB must also take annual required minimum distributions (RMDs) in years 1 – 9 of the 10-year period.
Question:If a 76-year-old is working full time and has a SIMPLE IRA and she does not own any of the company that sponsors the SIMPLE IRA, does she still have to take a RMD (required minimum distribution) from her SIMPLE IRA?
It looks like IRA owners will probably have to wait awhile to take advantage of a new program that allows them to self-correct IRA errors that previously couldn’t be fixed. In Notice 2023-43, the IRS said that self-correction for IRAs can’t be used until the IRS issues rules for the new program. And those rules aren’t required to be issued until the end of December 2024.
Question:In 2021, my wife inherited an IRA from her sister who was 4 years younger. My wife therefore is an EDB (eligible designated beneficiary). Her sister was 66 years old at date of death. My wife has been taking RMDs based on her own age. What happens when my wife dies? Do all the following beneficiaries have 10 years to deplete the inherited IRA? Are there RMDs that need to be taken each year for those beneficiaries? If so, is the RMD based on the factor that my wife was using?
