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 In This Update:
  • Q of the Month:
    Do I Have to Take My Husbandís RMD?
  • Key Focus:
    Building Your Childís or Grandchildís IRA
  • Ruling to Remember:
    Do You Really Have an IRA?

 Resources  Expert


?? Question of the Month: Do I Have to Take My Husbandís RMD in Year of Death?

Q: I have a question about the required minimum distribution (RMD) in year of death. My husband died in April 2012. I am the sole beneficiary of his IRA. He took no distributions prior to his death in 2012. I am 68 years old and am not required to take RMDs. I have taken several small distributions from my IRA this year. I intend to roll my late husbandís IRA into my own. Does the amount I have already taken from my IRA in 2012 count towards my husbandís RMD for 2012?

A: No. Unfortunately you donít get credit for taking distributions from your own IRA against the amount of your husbandís RMD, which you must also take by year-end. We recently wrote an article on this topic at The Slott Report.




IRA Timing is Critical: An Advisorís Guide to Key Ages, Dates, Years

The June issue of Ed Slott's IRA Advisor Newsletter talks about timing. As the saying goes, it is everything. That is especially true in the IRA world, as the tax code isnít exactly friendly when it comes to timing issues. You must be aware of the different dates, ages and ďclocks.Ē You have to know when they start, stop and everything in between.

In this issue, Ed Slott and his contributing writers provide a complete advisorís guide to key ages, dates and years. Also, IRA Technical Consultant Joseph Cicchinelli points out the similarities and differences between SIMPLEs, SEPs and Traditional IRAs.


Inside Ed Slott's IRA Advisor Newsletter

IRA Timing is Critical
An Advisorís Guide to Key Ages, Dates and Yearse

  • Age 59 1/2 Exception to the 10% Early Distribution Penalty
  • Age 55 Exception to the 10% Early Distribution Penalty (Plans Only)
  • Age 70 1/2 Rule for IRA RMDs
  • Age 70 1/2 Rule for QCDs
  • Once-Per-Year IRA Rollover Rule
  • 5-Year Rule for Roth IRA Conversions
  • 5-Year Rule for Roth IRA Qualified Distributions
  • 5-Year Rule for 72(t) Payments
  • Deceased Spouseís Age 70 1/2 for Surviving Spouse Beneficiaries
  • The Bottom Line: Time is of the Essence

Guest IRA Expert
Joseph Cicchinelli, MBA
IRA Technical Consultant
Ed Slott and Company, LLC

SIMPLEs, SEPs & Traditional IRAs

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June Key Focus

Building Your Childís or Grandchildís IRA

Many individuals donít know or understand the benefits of IRAs or saving for retirement.

One of the best ways you can help your children or grandchildren learn about investing for their future is to share your own experience. You know the value of a good retirement nest egg, but kids just donít think of those things. You probably didnít either when you were younger. By sharing your experience, by having your child or grandchild start saving early, and by making it fun, they will see the value (Editorís Note: Ed Slottís new book, Fund Your Future, talks about this topic and provides a detailed plan to get you there).

You can begin by telling your children and grandchildren about the value of preparing for retirement by making wise investments through a traditional or Roth IRA. A Roth IRA is particularly well-suited for younger individuals. Children or grandchildren are not interested in, or need, an income tax deduction for a contribution to an IRA. A Roth IRA has the ability to grow over the years on a tax-free rather than tax-deferred basis.

As your children or grandchildren mature and are able to understand some of the basics of investing, explain what you have done to grow your own IRA wealth. Your flourishing retirement account may be the best means of teaching your kids the value of smart investing and spurring them to build their own nest egg.

An IRA contribution must be based on the taxable compensation (earned income) of the individual for the year of the contribution. Compensation is income received for personal services rendered. Passive income, such as income from investments, is not considered for the purpose of making an IRA contribution. You can use this chart to see the 2012 IRA contribution limits.

If your child or grandchild has a part-time job, that money can be claimed as earned income. In these cases, you can even make monetary gifts to them, up to the amount they earned during the year, to help them fund their IRAs. Then, for each one, using their Social Security number, open an IRA in their name, designate an appropriate beneficiary and start watching it grow. Yes, they may be young, but each IRA owner should always have a beneficiary. Follow this beneficiary form checklist.

Visit The Slott Report ( for daily IRA, tax and retirement planning information, search our library, bookmark the site and subscribe to our email news feed so we can send all articles, videos and company information straight to your inbox each day.

Ruling to Remember

IN RE: PINK: United States District Court, N.D. Illinois, Eastern Division No. 11 C 6003, 05/10/2012

Michael and Sharon held traditional IRAs at Merrill Lynch until mid-2008. At that time, the two formed an Illinois limited liability company named Reira, LLC. Reira was established as a qualified self-directed IRA under section 408 of the Internal Revenue Code. Its operating agreement designated Michael and Sharonís IRA accounts as Reira members and Michael as manager.

After the companyís formation, the traditional IRAs were rolled over into the bank accounts opened for Reira. Most of the funds were eventually used for living expenses.

In late 2010, Michael and Sharon filed a joint voluntary petition for relief under Chapter 7 of the Bankruptcy Code. They claimed that the $139,000 left in the accounts initially intended for real estate investments should be exempt from inclusion in the bankruptcy estate because the funds were part of retirement plans.

The petition was denied. The judge held that the exemption does not apply to assets that were held in a retirement account at one time but were removed prior to the filing of a bankruptcy petition.

Just because you put the word IRA in the title of an account and treat the distributions as IRA distributions doesnít mean you necessarily have an IRA. The account MUST use an IRA agreement document that has been approved by IRS and there must be a beneficiary form as part of the account opening process. The custodian/investment/individual holding the funds must do the proper reporting to IRS of contributions (Form 5498) and distributions (1099-R). If these are not in place, you do NOT have an IRA

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