Anomalies and Exceptions
As already-complicated IRA rules spiral further into an abyss of confusion, it comes as no surprise that irregularities exist. Up is down and left is right. Green means stop, red means throw your hands up in exasperation.
Andy Ives
Inherited IRAs and RMDs: Today’s Slott Report Mailbag
Question:Greetings,If I have the beneficiaries on my IRA listed as my wife (50%) and two children over 21 (50%), is my wife still able to move her half of the IRA into her existing IRA when I am gone? Or does having the adult children as partial beneficiaries inhibit her ability to do a spousal rollover to combine it with her existing IRA?
Roth Conversion Confusion – Taxes Withheld When Under 59 ½
There is no doubt we have written about this topic in past Slott Report entries. Possibly many times. There is also no doubt that people continue to make this same error, over and over again. Such was the case recently when the Ed Slott team visited with 150-plus financial advisors from across the nation in Boston.
Trust as IRA Beneficiary – A Potentially Catastrophic Problem
We say in our training manuals that “the SECURE Act obliterates IRA trust planning.” That’s an aggressive word – “obliterates” – but it is accurate. We also shout from the mountain top that every trust created prior to the SECURE Act and named as an IRA beneficiary must be reviewed, potentially rewritten, or scrapped altogether. What was a perfectly effective planning strategy a couple of years ago could be totally useless now. Here’s how and why…
Age 55 Exception and Inherited IRAs: Today’s Slott Report Mailbag
QUESTION:Dear Mr. Slott,I have a client who, during 2022, was separated from employment, turned 55, and took a distribution from his former employer’s 401(k) account. We properly used the Rule of 55 exception to avoid the 10% early withdrawal penalty. During 2023 (without consulting me), he rolled the remaining balance of that former employer’s 401(k) account into an IRA, and THEN took a distribution from that IRA account. Does the 10% penalty apply to this distribution?Thanks,
Summertime Similes & Metaphors – No Shirts or Shoes Required
Oftentimes with these articles, I compare certain retirement account rules to arbitrary items. A creative metaphor or simile can help the reader grasp a concept. For instance, past entries have referenced revolving doors, hurricane preparedness, Bloody Mary cocktails, Charlie Brown’s Halloween costume, genies in lamps and even Indiana Jones. But I was struggling. No single comparison seemed to carry the weight necessary to create an entire Slott Report submission. So, here is a 6-pack of random summertime similes and other retirement account comparisons.
Death of an IRA Beneficiary – Before Claiming the Account
When an IRA owner dies, we look to the beneficiary form to determine who should receive the IRA funds. After death, there is a transition process as assets are moved into an inherited IRA for the beneficiary. But what if the beneficiary dies after the death of the original IRA owner, but prior to claiming the account?
NUA and Silver in Your IRA: Today’s Slott Report Mailbag
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.
If the IRS Ask Questions, Can Your Actions Be Justified?
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.
ALAR – The “At Least as Rapidly” Rule
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.
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