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In This Update:
- Key Focus: Unmarried Couples
and New Federal
- Ruling to
Remember: The 60-
Day Rollover Rule
- Q of the Month: Do I
Have to Take an RMD
if Still Working?
Question of the Month: Do I have to take a Required Minimum Distribution if working?
If you have worked any part of the year that you turn 70 1/2, what are the requirements for taking
Required Minimum Distributions (RMDs) for that year?
If you have a traditional IRA, you must start taking RMDs at age 70 1/2 regardless of whether you
continue to work or not. In the year you turn age 70 1/2, you can take your RMD by December 31 or
defer it until April 1 of the following year. You must take every subsequent RMD by year-end. The
good news for Roth IRA owners is that there are no RMDs.
If you participate in a company-sponsored plan and you are not a 5% or greater owner of that
company, the plan may not require you to take RMDs until you retire. If you retire at any point in
2011, you will have to take a distribution for 2011 from the plan assets.
THE EARLY BIRD GETS NEW BUSINESS!
REGISTER BEFORE THE LARGEST IRAS PASS YOU BY
GROUP DISCOUNTS AVAILABLE! CONTACT US AT 877-337-5688 FOR MORE INFORMATION
When the 2-Year Deal is Not Really a 2-Year Deal
The April issue of Ed Slott's IRA Advisor Newsletter lets you know when a deal is not really a deal.
Many individuals chose to go through with a Roth conversion in
2010 because income and filing status restrictions were repealed and
because of a special tax-break called the 2-year deal.
Instead of including all the income from a 2010 conversion in 2010,
clients can choose to split the income equally over 2011 and 2012.
However, sometimes events that occurred after the conversion
can alter the 2-year deal or elimate it altogether. What are these
FIND OUT WHEN A 2-YEAR DEAL ISNíT A DEAL IN ED SLOTTíS IRA ADVISOR NEWSLETTER
When the 2-Year Deal is Not
Really a 2-Year Deal
- Acceleration of 2010 Roth Conversion Income
- How It Works: The Acceleration of
Income in Action
- Reporting the Acceleration of 2010
Roth Conversion Income
- Death Can Deal a Fatal Blow to the
Advisors' 2011 Roth IRA Questions Answered
- Paying the Tax Under the 2-Year Provision
- No 2-Year Deal for 2011 Conversions
- No Income Splitting Over 2010, 2011 and 2012 for 2010 Conversions
- Changing your Mind on the Income Inclusion for 2010 Conversions
- Everyone can Convert in 2011
- Income Limits on Roth Contributions
- Beneficiary Options on Converting Inherited Retirement Assets
- Recharacterizing and Reconverting
Guest IRA Expert
Martin James, CPA
Dig Deeper for True Marginal Tax Rates
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IRA Advisor Newsletter subscriber, you can preview
past issues before subscribing.
April Key Focus
Unmarried Couples and the New Federal Estate Tax
The federal estate tax is back in effect as of January 1, 2011.
Originally, the tax was to apply to all estates over $1 million,
at a top rate of 55%. As a result of a last minute compromise
in Congress, the federal estate tax will temporarily be reduced
for two years. In 2011 and 2012, the estate tax will apply to
estates over $5 million at a top rate of 35%.
Unmarried, cohabitating individuals may be facing a
significant problem under the new provisions. Under federal
law, a person who dies can leave an unlimited amount of
assets to a U.S. citizen spouse without any of it being
subject to the estate tax at the time of his or her death
(assets bequeathed to a non-U.S. citizen spouse do not receive
this unlimited exemption and special planning is required in
these cases). But if you leave money or property to someone
you live with but are not legally married to, the same rules do
not apply. If the total value of all your assets when you die is
more than the estate tax exemption amount, then there most
likely will be estate taxes. For this reason, many
unmarried couples face much more difficult tax issues than
married couples and should consult with a financial advisor or
attorney knowledgeable in estate planning and familiar with
the new rules.
Same-sex couples also run into issues. They may live in states
that allow them to marry or have civil unions in which they are
treated the same as married couples for tax purposes, but that
only applies to state taxes. The federal government does not
currently recognize same-sex marriages or civil unions for the
purposes of federal taxes, so couples need to take extra care
now that the federal estate tax is back in full effect.
Ruling to Remember
Private Letter Ruling 201110014
"Matt" maintained an IRA with his bank, but decided to withdraw an
amount of money from that IRA and deposit it into an account at a separate
Why did "Matt" make the withdrawal?
It was based on his belief that the initial bank would fail to stay
financially solvent, and he was afraid of losing his savings. He spoke to an
individual at the second bank who incorrectly told him he had 90 days to
rollover the retirement funds into another IRA without penalty and he should
take that time to evaluate the financial stability of his current bank.
"Matt" relied on this individualís advice. He did take a small amount of the
money he withdrew from the IRA to reduce the interest expense on a bank
credit line. When his first bankís financial condition subsequently
improved, he deposited the initially-withdrawn funds into a SEP IRA
account. However, he made this rollover after the 60-day requirement,
finding out about his error in a notice from the Internal Revenue Service.
"Matt" filed a PLR and it was determined that he was given incorrect
information that resulted in his failure to accomplish a rollover in the proper
time frame. The 60-day rollover requirement was waived in this case, and
the rollover to SEP IRA was treated as a valid rollover contribution.
LESSON TO LEARN:
Double check the accuracy of information... and then check it again. In this
case, "Matt" didnít discover the problem until he was contacted by the IRS,
which you donít want contacting you on IRA matters. Make sure you work
with a competent financial advisor to get all questions answered
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