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The Slott Report

Need to Know: Roth Conversions and Pro-Rata Rule

One of the main things to consider when thinking about making a Roth conversion is the pro-rata rule. When an IRA contains both non-deductible and deductible funds then each dollar withdrawn from the IRA will contain a percentage of tax-free and taxable funds.

Pros & Cons of Roth Conversion

There has been a lot written about converting from a traditional IRA to a Roth IRA particularly in light of the law change taking effect on January 1st, 2010 which will permanently eliminate the conversion restrictions and allow everyone to convert. You have likely read about this in past articles at The Slott Report.We thought we would provide some simple pros and cons for you to consider.

Discussion Forum Topic: Taxable Account vs. Inherited IRA (Part 2)

There is no step-up in basis for inherited IRAs. This is always the case, regardless of the IRA's investments. If, though, the IRA owner had made after-tax contributions to the account during their life, there can be existing basis that would pass to you.

Discussion Forum Topic: Taxable Account vs. Inherited IRA (Part 1)

This week the Ed Slott IRA Discussion Forum featured a question about how inherited assets are taxed and treated. But are all inherited items the same? Does an IRA receive the same tax treatment as a taxable account? Keep reading to find out.

20% Withholding

Generally, when rollover eligible assets are distributed from a qualified retirement plan, 403(b), 401(k) or 457(b), to the participant, instead of a direct rollover to an eligible retirement plan, the payer must withhold 20% for federal income tax. And if applicable, any state withholding tax.

Discussion Forum Topic: Form 8606

This week, the Ed Slott IRA Discussion Forum featured multiple questions about IRS Form 8606. But what is this form and why is it so important? Read on to find out the Who, What, When, Where, Why and How of form 8606.

Use of Life Insurance to Protect IRA Assets

Life insurance is not only be the single biggest benefit in the tax code, but it is also the most cost-effective way to protect a large IRA. If set up correctly, life insurance proceeds (death benefits) could come into the estate sans estate and income tax.Life insurance premiums should be paid by the beneficiaries or by the trustee of an irrevocable life insurance trust so that life insurance proceeds will be estate and income tax free.

Converting Inherited Assets to a Roth IRA

You are a non-spouse beneficiary and you've inherited an IRA or employer plan assets. Can you convert those assets to a Roth IRA? The answer is yes and no.

QCDs (Qualified Charitable Distributions) in 2009

The qualified charitable distribution was first effective in 2005 and expired as of 12/31/2007. It has been extended for 2008 and 2009. Originally, it was a way for an IRA owner to take all or part of his or her required minimum distribution (RMD) as a distribution payable to a qualifying charity.

Roth IRA Recharacterization

If you recently converted a traditional IRA to a Roth IRA, you can recharacterize by October 15 of the year following the conversion. A recharacterization means reversing your Roth IRA conversion as if it never happened. When you convert a traditional IRA to a Roth IRA, you pay the income taxes based on the fair market value of the assets, your basis at the time of conversion.
 

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