IRA Rules

Archive for May, 2009

The designated beneficiary of an IRA is subject to IRA Required Death Distribution (RDD) rules when the IRA owner passes away. 

Failure to take the Required Death Distribution or RDD may subject the beneficiary to an excise penalty tax of 50% of the amount that should have been distributed. Each Traditional IRA account and SIMPLE IRA account stands on its own for purposes of determining post-death Required Minimum Distribution (RMDs). 

Important Points About Required Death Distribution

If the spouse is the sole designated beneficiary and is substantially older than the IRA owner, the beneficiary may wish to leave the IRA in the decedent spouse’s name and wait to make a choice until the end of the year in which the decedent would have turned age 70 �. However, if left as a Beneficiary IRA, the IRA will be paid to the surviving spouse’s estate upon his or her death, unless a remainder beneficiary is named. (see also: Stretch-out IRA Option)

All or a portion of an Ira Distribution from a decedent’s IRA may qualify as Income in Respect of a Decedent or “IRD”. If the IRA owner’s estate paid estate taxes, then the percentage of those taxes attributable to the value of the IRA may be deducted by the beneficiary to offset income from an Ira Distribution. The IRD rules are complex and we strongly recommend IRA owners and their beneficiaries consult with a tax or legal advisor regarding this issue.

Finance & Investment Tips : Roth IRA vs. IRA

Question: Does the pattern daytrading rule apply to retirement accounts, like an IRA?

If I buy a 50 shares of say QID in the morning. Then later buy another 50 shares of QID later that day. Then before market closes the same trading day, I sell all 100 shares. Does that count as 1 or 2 roundtrip trades?

Answer: I would say one but ask your account rep. The deal with IRA“s is that you must wait three days for funds to settle before you can sell twice. In other words if you own 50 QID and sell it you may then use those funds to buy QID or something esle but cannot sell again until funds settle or you will be in violation of the free ride rule. In odrer to day trade much you would need a very large cash reserve. I couldn’t tell you if the 5 pattern day trades per week applies to an IRA but I see problems attempting to day trade the account because of the affore mentioned rule.

Estate-Planning_IRAs.mp4