BPickerCPA

If you are over 59½ at the time you remove money from your roth IRA, there is NO, repeat NO, 10% penalty. All the exceptions of sec 72(t) apply, and the first exception is being over age 59½. Whoever tells you otherwise is just plain flat out WRONG. End of discussion.

I've talked to the IRS, and there are no answers at this time. I think a strong possibility is that the bene will be decided under the old regs (DOD), but they can switch to the computed life expectancy as would be under the new regs. A word of caution - I usually predict these things wrong!

Again, you don't need revocable trusts in order to set up a credit shelter trust after death. Revocable trusts make more sense in some states than in others, because of how probate is handled. No one here will be able to tell you how the credit shelter should be funded (which is the question you are actually asking). If the Roth is left to the trust, then you lose the ability to do a spousal rollover which means that the money has to start coming out of the Roth right away.

Usually people set up REVOCABLE living trusts, not irrevocable ones. Without knowing your parents intentions, there is no way to answer your question. But I suspect that someone may have sold your parents on the idea of a trust, without there being a complete understanding of whether one was really needed.

I have a section of that topic in my guide, "Barry Picker's Guide to Retirement Distribution Planning". Ed Slott discussed this in a previous issue of his newsletter. I'm sure it's in other books and articles.

Your pay is without taxes, but you would be taxed on your other income, I would surmise. So if you converted $10,000 to a Roth, you would add the $10,000 to whatever other TAXABLE income you have, and however that computes is what you'll pay in taxes.

It's passed the House of REpresentatives and the bill now goes to the Senate.

You are permitted to do a partial recharacterization, and I agree with your computation of how the 50% recharacterization would be computed and reported.

PLR 200116058 was the ruling that I obtained for a client. The most important thing to keep in mind is that the taxpayer has to go to the IRS first. The impression I got from dealing with the IRS was that this was the key. If they find you did not have a valid conversion, it will probably be too late to obtain relief.

The situation you described, the estate or trust is the bene of the IRA and the spouse is the bene of the estate or trust, means that someone screwed up. When I raised the question with IRS in Washington I was told that the rules have not changed, which means that it's a facts and circumstance issue to be decided on a case by case basis. I didn't see any way to resolve it by regulation, since I didn't really see an open question. Barry

My discussions with people in Washington indicate that separate accounts can be done after death, up to the 12/31 of the following year. The only time that you would need separate accounts during lifetime is if the spouse more than ten years younger is to be the sole beneficiary of one specific account. There is a problem with the wording in the regs, and my comment letter requested that this be fixed.

You can only do a conversion now if you will qualify to make a conversion in 2001, and such a conversion will count as a year 2001 conversion. It will be taxable in 2001. The deadline for year 2000 conversions has passed.

You did not need form 8606 to report the income from a year 1998 converion on your 1999, and 2000 returns. Hopefully it won't hurt anything.

John, Under the new rules, a designated beneficiary takes distributions over his or her lifetime. The tables go down to age 5. Barry

The payments over her life expectancy must start in the year after the year of death, regardless of your wife's age. There is NO, repeat, NO, 10% penalty for withdrawals on account of death. The person in the bank gave you wrong info. An inherited account does not have the same rules as your own IRA account.

If your wife is the named beneficiary, she can take distributions over her actuarial life expectancy. If her dad died in 2001, the first distribution has to be before 12/31/2002. It will be taxed as withdrawn. Your wife CANNOT change the account into her name, but her name should be added to the account, as beneficiary. e.g. John Jones, IRA, dec'd; Mary Smith, beneficiary.

I keep this stuff in my office. It is a year 2001 ruling (or maybe Dec, 2000) so it should not be hard for you to track down.

A recent private letter ruling permitted this scenario.

You don't recharacterize by filling out a form, you recharacterize by physically having the custodian redesignate the account (if eligible), or moving it to a Roth IRA.

Request to concede denied.... Concession indicates a victor and a loser. The purpose here is to determine what the rules are and how to use them to advantage, and avoid the pitfalls. When we do that through discussion, there are only victors, so NO ONE needs to concede. Barry

No form, you don't report it, the custodian does. Keep track of it on your own, though, in case you take a distribution and need to prove that it's a tax free return of contributions.

It's the LATER of 30 days OR the year after the year of the original conversion. So if you are recharacterizing a year 2000 conversion now, it's 30 days. If you recharacterize a year 2001 conversion, you have to wait until 2002 to reconvert.

After tax contributions are NOT eligible to be rolled into an IRA and by definition are therefore NOT eligible for Roth conversion.

She is NOT correct. But I am NOT surprised.

You have to check with a local attorney. In many states, IRAs are creditor protected. I don't know the law in MD.