Backdoor Roth IRA Contributions after Tax Reform

It pays to read the footnotes.

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New IRS FAQs Address 2017 Roth Conversion Concerns

The IRS has issued new guidance on recharacterization of Roth conversions, and it is good news for taxpayers who converted in 2017.

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Last Chance for Risk-Free Roth Conversions

The rules will change–and not for the better–in 2018, assuming the Tax Cuts and Job Act passes.

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2018 Retirement Plan Contribution Limits

The IRS recently announced the 2018 contribution limits for retirement plans.

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More on the Primacy of Beneficiary Designations

Beneficiary designations trump a will. Tennessee has a statute on it:

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Spousal Rollover When RLT is Beneficiary

Is a spousal rollover available when the beneficiary of an IRA is a revocable trust? Surprisingly, in some cases, the IRS says yes.

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Estate Planning for Retirement Assets in a Nutshell

When the owner of an IRA or 401(k) plan dies, the plan must pay out over some period of time. This is true regardless of whether the IRA/401(k) is a traditional account or a Roth account. The only exception is when the surviving spouse is named a beneficiary. In that case, the surviving spouse has the option of rolling over the decedent’s account to his or her own account. Amounts distributed from a retirement plan–excluding Roth distributions–generally constitute taxable income to the recipient. From an income tax standpoint, the best result is to “stretch out” payments for as long as possible. This is desirable even with a Roth account, because amounts remaining in the account continue to grow tax-free. The tax rules […]

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2018 HSA Limits Announced

The IRS has announced the maximum amount an individual can contribute to a Health Savings Account (HSA) in 2018. For individuals with self-only coverage, the HSA limit will be $3,450. For individuals with with family coverage, the limit will be $6,900. In order to qualify for an HSA, you must be enrolled in a “high deductible health plan.” For calendar year 2018, a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,350 for self-only coverage or $2,700 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,650 for self-only coverage or $13,300 for family coverage. Earlier posts about HSAs: Are HSAs Protected […]

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RMDs after Primary Beneficiary Dies

Father, the primary beneficiary of an inherited IRA, dies before the account is exhausted. His Child becomes the beneficiary. Are RMDs now based on Child’s life expectancy? No: If the individual beneficiary whose life expectancy is being used to calculate the distribution period dies after September 30 of the calendar year following the calendar year of the employee’s death, such beneficiary’s remaining life expectancy will be used to determine the distribution period without regard to the life expectancy of the subsequent beneficiary. September 30 of the year after the original IRA owner’s death is referred to as the “Designation Date.” RMDs are determined based on the life expectancy of the person who is the beneficiary of the IRA as of the […]

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PLR Sheds Some Light on the Identifiable Beneficiary Issue (maybe)

Consider the following the scenario: Decedent establishes a trust under his will. Under the terms of the trust, Decedent’s daughter is entitled to all net income. In addition, the trustee, a financial institution, is authorized to distribute trust principal to Daughter and Daughter’s descendants for health, education, support, and maintenance. Upon Daughter reaching the age of 50, the trust will terminate and be paid to Daughter outright. However, if Daughter dies prior to age 50, the trust addresses a variety of contingencies: Daughter’s children are next in line as beneficiaries; If any of Daughter’s children are under the age of 21, his or her share will be held in further trust; If a child of Daughter dies after Daughter but prior to 21, his or […]

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Retirement Assets Payable to Trust: the Identifiable Beneficiary Issue

When naming a trust as beneficiary of an IRA or other retirement asset, it is critical that the trust be recognized as a “qualified trust.” This allows the trustee to stretch out payments from the IRA in a tax-efficient manner, namely over the life expectancy of the oldest beneficiary. If a trust is not a qualified trust, the IRA must be paid out in a tax-inefficient manner: within (a) 5 years or (b) the account owner’s remaining life expectancy, depending on whether the account owner died before or after age 70 1/2. In order for a trust to be qualified, it must, among other requirements, have identifiable beneficiaries, all of whom are individuals. However, determining who the beneficiaries of a trust […]

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Are HSAs Protected from Creditors?

Yes: Except as provided in subsection (c), any funds or other assets payable to a participant or beneficiary from, or any interest of any participant or beneficiary in, a retirement plan which is qualified under §§ 401(a), 403(a), 403(b), 408 and 408A, or an Archer medical savings account qualified under § 220 or a health savings account qualified under § 223 of the Internal Revenue Code of 1986, as amended, are exempt from any and all claims of creditors of the participant or beneficiary, except the state of Tennessee. All records of the debtor concerning such plan and of the plan concerning the debtor’s participation in the plan, or interest in the plan, are exempt from the subpoena process. The […]

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HSAs for Retirement Planning

Although many people think of Health Savings Accounts (HSAs) as simply a vehicle to pay current medical expenses, they can also be a valuable component of retirement savings. Contributions can be invested like a 401(k), and the growth inside the account is not taxed currently. Prior to age 65, distributions for qualified medical expenses, long-term care insurance, COBRA coverage, and health coverage while receiving unemployment compensation are tax-free. Other distributions are subject to tax, as well as a 20% penalty. Starting at age 65, distributions for Medicare premiums for Part A, B, or D and for Medicare HMO are tax-free. Other distributions are taxable, but are not subject to the 20% penalty. Thus, much like an IRA, you can defer income […]

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Contribution Limits for Retirement Plans Remain the Same in 2017

Source: IRS Notice 2016-62 Posted by Joel D. Roettger, JD, LLM, EPLS

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