Andy Ives | Ed Slott and Company, LLC

Andy Ives

SECURE Act: “We Don’t Know Yet”

Gradually, the IRS is clarifying sections of the SECURE Act that require further guidance. In Notice 2020-68, released September 2, the IRS addressed a number of items in a Q&A format. For example, “Is a financial institution that serves as trustee, issuer, or custodian for an IRA required to accept post-age 70½ contributions in 2020 or subsequent taxable years?” Surprisingly, the answer is No. Financial institutions do not have to accept post-age 70 ½ IRA contributions even though such contributions are permitted by the SECURE Act. (Why an institution would refuse these deposits is beyond me.)

Inherited IRAs and the 60-Day Rollover Window: Today's Slott Report Mailbag

Question: Good Afternoon Ed Slott and Company, LLC, I was inquiring about a recent situation with a client that came up and if you could be of any assistance. We recently had a client pass away who was the account holder of an inherited IRA from his mother. This client died in July 2020. The deceased listed his wife as 100% primary beneficiary of his inherited IRA and she will inherit this second-generation IRA once the new account is opened.

Perils of the 60-Day Rollover

As sure as the sun will rise, someone will take a distribution from his IRA tomorrow. And as sure as the moon will set, someone will fail to roll over his IRA distribution within 60 days. And as sure as the wind will blow, so too will the icy gusts from the IRS as penalties and taxes accumulate like a snowdrift upon said distribution when the 60-day rollover deadline is missed. Yes, a person is permitted to take a distribution from his IRA and roll it over to another (or the same) IRA within 60-days. But only one rollover is allowed within a 12-month period. That means no rollovers for the next 365 days.

“Dollar Cost Average” Your Roth Conversion

Dollar cost averaging is a tried-and-true investment strategy that has existed for decades. Using this technique, an investor divides up their entire amount to be invested and makes smaller periodic purchases over a desired time. The goal of dollar cost averaging is to minimize the potential volatility of a single large investment. Essentially, dollar cost averaging seeks to reduce the possibility of making a big purchase just before the value drops. Example: Roger has $10,000 and wants to invest in a mutual fund. Roger is unsure what the market’s direction will be over the next few months. To avoid the possibility of investing the full $10,000 all at once and then having the market immediately drop, Roger elects to dollar cost average.

Returning Unwanted RMDs: Today's Slott Report Mailbag

Question: 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. Thanks. Answer: Yes, the three RMD payments can be “repaid” to the IRA, but a deadline is fast approaching. Plan-to-IRA rollovers do not count against the one-rollover-per-year rule, so that is not a concern. However, since these RMD payments were taken back in January, February and March, they are outside of the standard 60-day rollover window.

Stop Naming Trusts as IRA Beneficiaries!

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.

Death During a Rollover

A financial advisor contacted me about her client who had recently passed away. The advisor was legitimately concerned about a rollover check received by the now-deceased individual. It had not been deposited into his IRA prior to death. Was her client’s estate stuck with a taxable distribution? Could the financial institution refuse the rollover because the person was no longer of this earth?

RMDs in 2020: Today's Slott Report Mailbag

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”).

Extended Rollover Deadlines Explained

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.

Six Months of Crazy – A Summary of Recent Retirement Events

After a six-month sprint through a diabolical obstacle course of new laws, a pandemic, record unemployment, deaths, confusion and complete disruption of everyone’s professional and personal lives, this seems like a good time to recap the madness of the pr

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