Yes, trusts can play an instrumental role in estate planning. Yes, special needs trusts are invaluable to those with disabled or chronically ill family members. Trusts are essential for minors and for those who may struggle with managing money. Trusts also allow for post-death control of assets. But they are not for everyone, nor are they a panacea when it comes to estate planning…especially with IRAs.
I continue to pound my head on the desk every time I encounter a trust unnecessarily named as an IRA beneficiary. Why did the IRA account owner name the trust? Bad advice? Was he simply trying to keep up with the Jones’ who bragged about their trust? Did he read someplace that all trusts are great? Was he intentionally trying to make things difficult for his IRA beneficiaries? Sadly, “making things difficult” is oftentimes the unintended result.
Question:
I can't find the answer to this question anywhere, so I thought I'd go straight to the experts.
Does the CARES Act waive the requirement for a surviving spouse to distribute the RMD in 2020 prior to re-registering the IRA in the surviving spouse's name? The deceased spouse had reached their required beginning date.
I've read Notice 2020-51, but it does not address this issue specifically.
Thanks!
Hidden within the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) signed into law last December is a provision giving businesses extra time to establish certain new tax-qualified retirement plans.
Prior to the SECURE Act, a new workplace plan had to be adopted by the last day of the employer’s tax year. Despite that deadline for adopting a new plan, businesses were always allowed extra time to make retroactive employer contributions for any year (including the plan’s first year). The employer contribution deadline is the due date (including extensions) of the company’s federal tax return.
Last year the SECURE Act became law and eliminated the stretch IRA for millions of IRA beneficiaries. However, for some IRA beneficiaries the stretch lives on.
For most beneficiaries, the stretch is now replaced with a ten-year payout period. Beginning for deaths in 2020, the ten-year rule will apply to designated beneficiaries who are not eligible designated beneficiaries under the SECURE Act. Eligible designated beneficiaries include spouses, minor children of the IRA owner, chronically ill and disabled individuals and beneficiaries who are not more than ten years younger than the IRA owner.
Question:
Once the RMD’s for 2020 were suspended, I withdrew what would have been my RMD from my traditional IRA and deposited it in my Roth IRA. Can I now withdraw that amount from my Roth and repay it to my traditional IRA?
Thank you.
Russ
Answer:
Russ,
Once you deposited the RMD amount into your Roth IRA, it became a conversion. Roth conversions can not be reversed (“recharacterized”).
It happens. You have made a 2019 contribution to the wrong type of IRA. All is not lost. That contribution can be recharacterized. While recharacterization of Roth IRA conversions was eliminated by the 2017 Tax Cuts and Jobs Act, recharacterization of IRA contributions is still available and can be helpful in many situations.
Maybe you contributed to a traditional IRA and later discovered the contribution was not deductible. Or maybe you contributed to a Roth IRA, not knowing that your income was above the limits for eligibility.
The IRA and plan rollover rules have been in constant flux this year. We are now past the original July 15 extended rollover deadline. This was the first extension date created by IRS Notice 2020-23. Distributions from an IRA or company plan taken February 1 or later could have been rolled back to an IRA or company plan beyond the standard 60-day rollover window. This rule applied to any distributions that were otherwise eligible to be rolled over, including unwanted RMDs.
Question:
For COVID "special" Aug 31 rollovers, am I allowed to return my 401(k) required minimum distribution (RMD) to my IRA?
Thank you,
Maria
Answer:
Hi Maria,
Yes, the CARES Act and subsequent IRS guidance allows unwanted
Admittedly, it’s not such a bad problem to have. Nonetheless, it’s true that high-paid company plan participants can have their benefits limited by the IRS compensation limit.
The compensation limit is $285,000 for 2020 and goes up most years based on cost-of-living increases. It was $280,000 for 2019 and $275,000 for 2018.
Pay above the limit can’t be used in determining employer contributions made to 401(k) plans and SEP and SIMPLE IRAs. Excess pay also can’t count towards benefits earned in defined benefit pension plans.
The countdown to the much delayed 2019 tax filing deadline is on. The deadline is July 15, 2020, which is only a couple of days away. Time is running out. Is your IRA ready?
Making Your 2019 IRA Contribution
Due to the COVID-19 pandemic the 2019 tax-filing deadline has been extended until July 15, 2020. This means that July 15, 2020 is also the deadline for making a 2019 IRA contribution. This is true even if you have an extension to file your tax return. An extension does NOT give you extra time to make a traditional or Roth IRA contribution. So, if you are thinking about making a 2019 contribution, the clock is ticking.
