IRA Rules

Posts Tagged ‘iras’

Stretch IRA rules : Example 1:

A designated spouse beneficiary of a stretch out IRA account has various payout options. One of these options, available only to a designated spouse beneficiary, is to rollover the decedent’s IRA into the spouse’s own existing or new IRA. This choice, under stretch IRA rules, permits the spouse to name his or her own primary beneficiaries who could, in turn, eventually name their own remainder beneficiary.

Stretch IRA rules : Example 2:

A Roth IRA account owner, age 75 names his child, age 55, as his designated beneficiary. If the Roth IRA account owner dies, his child has the option to take IRA distributions based on his or her own single Life Expectancy. (IRA Distributions must begin by December 31st of the year following the year of the Roth IRA owner’s death.)

In this situation, assume the designated beneficiary is 59 years old in the year the distributions are required to begin. At age 59, the single Life Expectancy factor is 26.1. The designated beneficiary should now name his or her own remainder beneficiary so that if the designated beneficiary does not survive the Life Expectancy of 26.1 years, the remainder beneficiary will be able to continue the annual minimum distributions until the IRA is exhausted in the 26th year.

Stretch Ira Rules : Example 3:

An IRA account owner passed away at age 64 and had named her spouse as the sole primary designated beneficiary. Rather than moving the inherited IRA into his existing IRA, the spouse chose to keep the assets as a Beneficiary IRA. (A Beneficiary IRA remains in the name of the deceased IRA owner, F/B/O the designated beneficiary.) The spouse decided to delay distributions until his wife would have turned age 70 �* and he also named his daughter as the remainder beneficiary. The spouse beneficiary passed away at age 65 (before his wife would have turned age 70 �). In the year following the spouse beneficiary’s death, the remainder beneficiary could continue annual minimum distributions based on the remaining Life Expectancy of the spouse beneficiary in the year of the spouse beneficiary’s death. In this case, the remainder beneficiary would start with a Life Expectancy factor of 21.0. The remainder beneficiary (the daughter) would have 21 years to deplete the IRA.

*Only a sole-designated spouse beneficiary can chose to delay mandatory distributions until the original IRA owner would have turned 70 � years old.

Question: Does transferring a Roth IRA to another institution impact the five year rule for qualified distributions?

If I transfer a Roth IRA from one financial institution to another, will the five year waiting period for tax-free qualified distributions be impacted, or will it still be calculated from the date I first contributed to the IRA at the original institution?

Answer: it would be better if you let the institutions transfer the money between them so that you do not have constructive receipt of the money

Donnie Mac & Kathy Carlille, “Summertime” (08-16-2005 (06))