Stop Naming Trusts as IRA Beneficiaries
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STOP NAMING TRUSTS AS IRA BENEFICIARIES!

By Andy Ives, CFP®, AIF®
IRA Analyst

By Andy Ives, CFP®, AIF®

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.



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How to Find Good Advice on Using Individual Retirement Account Income

Ed Slott

Every month, IRA expert Ed Slott is taking your questions about Individual Retirement Accounts on AARP:

I am 62 and plan on working to 65 before retirement. I am already receiving a pension from a prior job. I would like to seek advice from a professional regarding the best ways to position my retirement assets prior to retirement. Also interested in best time for my wife and me to begin Social Security.

What type of financial professional or resources should I seek out for this type of advice?

It's good you are looking to get professional advice on this, because there are several factors you need to consider: mainly income and taxes in your retirement years. As a CPA and retirement tax adviser, I did exactly this type of planning for many years, so I know what's involved here and am happy to offer my assistance to you.

Your situation is common, since it involves Social Security benefits timing to be coordinated with your overall retirement plan. There is no such thing as a plan that is perfect for everyone. It cannot be a cookie-cutter plan. It must be personal and customized to you.



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Mailbag


Q: In December of 2018 I did my first partial Roth IRA conversion into a new Roth IRA. I'm older than 59 ½.

In December of 2019 I did my second partial Roth IRA conversion into the same Roth IRA opened in December of 2018. The traditional and Roth IRA's are held at the same company, so the conversions are easy. Does the 5-year waiting period apply to each conversion, or just the first one?

Answer

Q:Client made a 2020 non-deductible $6,000 IRA contribution and immediately converted to Roth in 3/2020. Roth was invested in travel sector and plummeted from $6,000 to $2,300. Client panicked, sold the stock and took a premature withdrawal, thinking he could just redeposit the $2,300 along with $3,700 more into a Traditional IRA for 2020, and redo the entire transaction as if the first one never happened.

Since that is not an option, he is now beyond the 60-day redeposit window. Does the CARES Act apply to Roth IRAs, thereby allowing him to at least redeposit the $2,300 back into the Roth?

Answer

Q: My client is 85 years old. He took his 2020 RMD on 1/08/2020. He died in April 2020. Can we put his RMD back into his IRA?

Answer

Q: Client has a Thrift Savings Plan and took RMDs in January, February and March of 2020. Client then rolled the balance of the TSP into an IRA. Question is whether or not he can "repay" those RMDs to the IRA under Notice 2020-51.

Answer

Q: My son is attending college. I plan on using my IRA to pay off his school debt. I'm old enough to avoid penalty, but do I get any tax break for using it for education?

Answer

Have a question for our IRA Technical Team?
Email your questions to us at mailbag@irahelp.com. Selected questions will be featured every Thursday in the Slott Report.

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