Choosing a beneficiary for your IRA is a decision with many variables to consider. Long term tax deferral can be very different depending on your choice.
IRA
Trust Me, You’re Gonna Like This – The See-Through Trust as a Beneficiary
One area that often gets short shrift in discussions of IRAs and beneficiary designation is the use of a trust as the beneficiary. Part of the reason behind this may be the perceived complexity of trusts in general; at any rate, it’s not as complicated as it sounds, and it can be beneficial, depending upon your circumstances. We’re specifically discussing the “see-through” trust here, as this type of trust is most appropriate for IRA and Qualified Retirement Plan beneficiary designations. The See-Through Trust as a Beneficiary If you designate a trust as the beneficiary of your IRA or Qualified Retirement Plan (QRP), the trust should be set up with certain properties associated with it: the trust must be valid under the plan owner’s state’s law; the trust must be irrevocable upon the plan owner’s death; the trust beneficiaries must be identifiable; ALL of the trust beneficiaries must be individuals (cannot […]
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Turns Out You CAN Be A Little Bit Pregnant
Remember back in junior high (or whenever it was) during health class (or sex ed, or whatever they called it for you) – how it was explained that pregnancy is a black or white thing: “nobody gets just a little bit pregnant” was the story my health teacher gave us to remember. As it turns out, there are many other absolutes in life that are similar. However, in a totally characteristic move, the IRS gives us a way that takes something that you think would be absolute, and twists it so that you can, in fact, be a little bit pregnant (or rather, a little bit taxable, a little bit tax free, in this case). Confused yet? Sorry, that wasn’t my intent… some people refer to this as the “cream in the coffee” rule. With this analogy, it is explained that once you put cream in your coffee, you can’t […]
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Roth Conversions for Inherited Retirement Plans
If you have an IRA or a 401(k) that you’ve inherited, you may wonder if it is possible to convert that account over into a Roth IRA. After all, you’ve got to take RMD (Required Minimum Distributions) from the account since it’s inherited, why couldn’t you just pay all the tax upfront and roll it over? Well, there are two answers to this question, one for inherited IRAs, and one for inherited qualified retirement plans (QRPs, such as 401(k) or 403(b) plans). And like many other things in this wonderful tax code of ours, the two kinds of plans are treated differently today, but may be subject to change in the future. It should be noted that we’re talking about non-spouse beneficiaries here. A spouse has pretty much the same rights as the decedent (original owner, now deceased) had, so if the decedent was eligible for a Roth conversion, the […]
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How QDRO Impacts NUA
Don’t let the alphabet soup in the title put you off. If you’ve never come face-to-face with a QDRO you might not need to know this – but then again, the basic underlying premises are good information to understand… First some definitions, just so we know what we’re talking about: QDRO: Qualified Domestic Relations Order – this is a method for permitting distributions from a qualified retirement plan (not an IRA) in the event of a divorce. How a QDRO works is that, upon the decreed division of assets, if a retirement plan (such as a 401(k) or 403(b)) of one spouse is chosen as an asset to be divided and a portion given to the other spouse, a QDRO is issued. The QDRO allows the division to occur without penalty… otherwise, making a distribution from a qualified plan before age 59½ would result in penalty and possible taxation, as […]
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Pension Payout: Annuitize or Rollover (Cash)?
If you happen to be in one of those jobs (there can only be a handful left at this point, right?) that has a traditional pension plan, you may be faced with an important decision. When you’re ready to retire (did I just hear angels singing?) – you have to decide if you’ll take annuitized payments, or if you cash out the plan and roll it over to an IRA. These “traditional” pension plans are referred to as defined benefit (or DB) plans – meaning that your benefit is defined as a determined amount. This benefit is usually based on a combination of your longevity in the job, plus your ending salary. You’re probably familiar with these computations: an example is a pension that is 2% per year of employment, multiplied by the average of your final five years of salary. So if you worked at a job for 25 […]
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The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This manual is available on 
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Sterling’s first book, Lose Weight Save Money, can be 
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
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And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.