BPickerCPA

The law says the estate, or the eventual heirs, can continue taking on the same schedule. But some custodians don't permit it, which is their right.

First, mom had to start taking beneficiary distributions the year after grandmother's death, not when mother reached 70½. The rule on the death of a beneficiary after the beneficiary has started taking distributions is that the distributions can continue over the remaining life of mother. In other words, the distribution schedule does not change. However, some custodians will insist on an immediate payout. They can do this, even though the law does not mandate it. If you come across that, try moving it to another custodian prior to distribution. After distribution, nothing can be done.

You cannot use your Roth IRA money to set yourself up in business. It's a prohibited transaction and will destroy your Roth IRA.

You are correct that your five year period started on 1/1/2003 and you will be past the five years at the beginning of 2008.

It makes no difference if you put your non deductible IRAs into a separate account. At the time of withdrawal, all IRAs are combined on the 8606, so you cannot 'designate' your withdrawal as coming from only the non deductible account.

An SNT that is not a self settled trust, but rather is a trust created by the IRA participant, would be treated like any other trust as beneficiary, and this PLR would have no significance.

I've never had a waiver denied, and I've never paid it up front. There is absolutely NO issue about repaying the estate. Even though the decedent did not take the RMD before death, the beneficiaries take it now, and they pay the tax. Technically, the estate owes the 50% because it was the decedent who failed to take the RMD. The beneficiaries have not liability, other than a possible transferee liability down the road. The estate needs to request the waiver.

Without knowing the terms of the trust it's impossible to know if the IRA is required to make minimum distributions now or when spouse attains age 70½. In any event, the requirement for the IRA to make a minimum distribution and the requirement for the trust to make payments to the spouse are two separate and distinct issues, not related to each except to the extent that it would affect the computation of a required minimum. Also, depending on the terms of the trust and the actions by the trustee vis a vis the trust and the IRA, there may not even be the ability to stretch out IRA distributions over anybody's life. You need to speak to a professional, IMO.

Custodian will not want to give IRA to wrong person, so they probably won't do anything until someone has a court decision. The bottom line is that state law will control.

I don't see a problem with this arrangement IF everything is properly documented. There would be nothing wrong with an employer making direct contributions to an employee's IRA, as long as the employer treated it as normal wages and it was included as income on the employee's W-2. The employee would then either take a deduction on their personal 1040, or file Form 8606 indicating that a non deductible IRA contribution was made. Since the original post does not indicate the tax reporting/handling of the arrangement, I cannot say for certain whether there is a problem (as JanetM suggests), or not. Further information would be needed.

It's possible to do what you want with a trust, but care must be taken. If set up properly, the IRA would pay out over the child's life expectancy. If not set up properly, then the payout will be much, much faster. Unfortunately, not every attorney (actually a minority) know how to set these up properly.

Your understanding is incorrect. You need not wait five years for each conversion.

If the child is the named beneficiary, then child can use own life, not parent's.

You cannot roll over non qualified money into an IRA. All you can do is contribute the annual limit to an IRA, if there is sufficient earned income.

The grandson needs to take the 2006 distribution. The distributions should have been coming out over the grandmother's life expectancy, and the grandson will continue to take the distributions over the grandmother's life expectancy, as if she were still alive.

No such exception. I have no idea where you heard it, but it is completely incorrect.

Even for a distribution that qualifies for ten year averaging, that does not give you ten years to pay the tax. Ten year averaging (simplified version) is a computation that basically computes the tax on one-tenth, and multiplies it by ten. But the tax is still due all in one year.

John, Only paying the income tax on the withdrawal.

If you withdraw money from your 401k you will owe the 10% penalty in addition to the tax. Only withdrawals from IRAs can be made penalty free for qualified education expenses.

Character of the income is NOT determined by the assets inside the IRA. ALL withdrawals are ordinary income, except for any basis recovery. There is NO question and there really is NO discussion. That is just the way it is.

John, Accounts inherited from the same decedent can be combined with each other, but not with any other accounts, whether your own, or inherited from a different decedent.

First of all, if the uncle was over 70½ when he died, you don't have the five year plan. In any event, there is NO 10% penalty on an inherited IRA. You should opt for taking the minimum distribution based upon her life expectancy. You are NOT locked into taking only the minimum; you can TAKE MORE any time you want. Be aware that banks/brokers do not always provide the correct advice.

Roth conversions can be reversed by a process known as "recharacterization". A recharacterization can be in part or full. Since you want to do a partial recharacterization, you or the custodian has to compute the "applicable income" attributable to the recharacterized amount. You may need professional assistance if the custodian is unable to properly do the calculations.

You would need to first convert the 401k to a traditional IRA, in order to then convert all or part of that IRA to a Roth. There is not enough information to make a determination as to the advisability of doing the conversion.

You must withdraw it. You cannot contribute more than the combined $3,000, assuming you're under age 50.