The Slott Report | Ed Slott and Company, LLC

The Slott Report

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.

Paying Taxes on a 2010 Roth Conversion

2010 is coming up fast with its new Roth conversion rules. In 2010 anyone can do a Roth conversion. The income and marital restrictions are permanently removed. In addition, the government is going to give you a deal on paying the taxes due on any conversions you do in 2010.

IRA-to-IRA Rollovers: The Once Per Year Rule

IRAs are not savings accounts. The IRA account comes with some very strict rules on moving the funds from one account to another. If you do not follow the rules, you can lose the tax deferred status of the IRA funds and have to pay income tax on them.There are two ways to move IRA or Roth IRA funds.

Trusts as IRA Beneficiaries

The number one problem I see when a trust is named as an IRA beneficiary is that at some point, either during the account owner's lifetime or when the trust inherits the IRA, the IRA gets transferred into the trust. An IRA is an Individual Retirement Arrangement and it must be owned by an individual. The transfer into the trust is a taxable event and cannot be undone, but it can be avoided.

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