Jan 27 2009
IRA’s, Beneficiaries and PLR’s
There have been some changes made to how these things work. The IRS private letter rulings (PLR’s) often prove useful to those of us who are trying to find out how our situations can be affected by certain aspects of our investments (i.e. the technicalities). The following are some tips on both IRA’s and beneficiary issues.
-Thanks to IRS Notice 2008-30, non-spouse beneficiaries can transfer a qualified retirement plan to an inherited Roth IRA…as long as the transfer is allowed by the plan and the Roth conversion eligibility requirements have been met by the beneficiary. Beginning in 2010, all plans must allow these transfers.
-IRA owners may be able to avoid the 10% penalty on SEPP (substantially equal periodic payment) distribution problems due to a custodian failing to make the payment, by asking the IRS for relief. It seems that they are more understanding now that problems such as this could become more and more common as financial institutions engage in mergers.
-Naming an irrevocable discretionary trust as your beneficiary, instead of a revocable trust, can help keep creditors from claiming your IRA funds upon your death.
-Be sure your beneficiaries are “readily identifiable”, by the IRS’ standards, to avoid tax trouble for them in the future regarding the inherited IRA.
-When considering disclaiming an IRA, consult a professional for advice. A mistake in the disclaimer could spell lots of hassle later on.
-When naming a minor(s) as a beneficiary, make sure you also name a custodian or trust to hold the inherited IRA. Again, failure to do so could create unnecessary tax problems.
I hope these tips are helpful. If any of my information is ‘off’ or otherwise not useful, please feel free to school me! I’m not an expert by any means and am always looking to expand my knowledge.
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