BPickerCPA

[[What you say makes sense. However, I had hoped that the substantially equal payments were like the minimum distribution requirements (MDR) where you are always free to take out more if you want...]] No way. You're locked in to the schedule. No more, no less.

He cannot basically empty his IRA in the next 5 years. The 3 methods are approved methods, but not necessarily the only ones. But the method is suppose to allow the account to last a lifetime. If you want to use a different method I would suggest spending the money on a private letter ruling.

The surviving spouse will continue to use joint life expectancy on their original IRA. ON the inherited IRA, they should put that into a new account where they can name new beneficiaries and use the new beneficiary to compute minimum distributions.

If you take the withdrawal before the actual date that you attain age 59½, you WILL be penalized. There is no grace period. A distribution that is not rolled over within 60 days relates back to the date of the original withdrawal.

If the contribution was made to an account that has no other Roth money in it, you can choose to recharacterize it to a traditional IRA by moving the entire account at its then current value at the time of the recharacterization. Otherwise the regs provide only one way to determine how much to withdraw or recharacterize.

Would you care to explain how her income was kept under $100K. It sounds like her required distribution, which would have had to be taken prior to the conversion, would put her close to that number. Then there's social security. Was all her other income from tax free sources?

I have never seen a beneficiary designation that mandated the custodian to compute the required minimum distribution. As far as I'm concerned, the custodian can have whatever release language they want, as long as they basically shut up and do what the IRA owner or (after death) beneficiary tells them to. My simple objection is being told that the custodian cannot comply with a request because the request violates tax law, when the request does NOT violate tax law. Telling an account holder that a request violates tax law, constitutes providing tax advice. When that request in fact does NOT violate tax law, telling the account holder that it does constitutes malpractice. No amount of disclaimer language will get the custodian off the hook.

Check out section 72(t)(4)(A)(ii). Modification after death or disability does not disqualify the SEPP plan.

January 1, 2000, if you can find a bank open that day (and their computers working). The more realistic answer would be January 3, 2000 (but only if their computers are working).

[[Announcements 99-57 and 99-104 both extended the date to recharacterize your contribution or conversion. However, both announcements stated that you MUST have timely filed your return by April 15 in order to take advantage of the extensions. If you had originally applied for an extension until August, that is the date you would have had to recharacterize by.]] This is WRONG! The Announcements stately simply that you must have timely filed your return. A return filed on a valid extension is still timely filed. Anyone who has filed their tax return on or before October 15, 1999, and had a valid extension (if filed after April 15, 1999) is covered by the two announcements, and has until December 31, 1999 to do a recharacterization!

Since there is no clear guidance from the IRS on this issue, we have always advised the beneficiary to take the decedent's required distribution in the year of death. Remember that a required distribution cannot be rolled over. It's the safest course of action.

You do NOT want to withhold taxes from the conversion, if you can help it. That will be considered a distribution subject to penalty.

It is possible to do a recharacterization up to October 15th, even if you already filed. If you do recharacterize, any conversion you do after that counts as a 1999 conversion.

The IRS form 5305 has a line on it that states that if the beneficiary is the spouse, that spouse automatically rolls the roth into his or her own roth. All you need to do is cross out that line. IF the brokerage account application does not use form 5305 but has a similar line, cross out that line.

The issue of IRA and Roth IRA creditor protection is a matter of state law. I know that they are both protected in NY and NJ.

Kathy is right. I B Watchin is wrong. The Roth can used for penalty free withdrawals for higher education.

I think you might be misunderstanding the trust as beneficiary rules. The regs (1.401(a)(9)) state the circumstances where a trust is the named beneficiary, that you are permitted to look thru the trust and compute the distributions as if the beneficiaries of the trust were the beneficiaries of the IRA or retirement plan. Once you do that, all the other rules apply including the MDIB rules.

You can still contribute to the Roth. The contribution starts to phase out for single people at an income of $95K, and disappears completely at an income of $110K. The phase out range for married couples filing jointly is from $150K to $160K.

Bruce, Perhaps you can also explain why IRA custodians, who insist up and down that they do not give tax advice, keep refusing to follow (valid, legal) requests from IRA holders and beneficiaries because "it's not permitted by the IRS". Doesn't that constitute 'tax advice'?

Not all of TaxTools calculations are correct. I would make sure I double check all of their numbers before using them, especially in cases involving Minimum Distribution Incidental Benefit rules. [This message has been edited by BPickerCPA (edited 09-26-1999).]

Look at the Prop regs 1.401(a)(9) Q&A in the D section. That explains the rules for when you can look thru a trust beneficiary to allow stretch out payments based upon the life expectancy of the trust beneficiary. Even if the trust does not qualify, it doesn't necessarily mean that the IRA must be paid out immediately.

Contributions to a Roth can always be withdrawn tax and penalty free at any time. Earnings that are withdrawn for qualified higher education expenses do not constitute qualified Roth IRA distributions. Therefore the earnings WILL be subject to income tax, but will be exempt from the 10% penalty.

You are correct that the QDOT designation of the trust itself has not effect. You mention spousal rollovers. No trust can do a spousal rollover. If the trust provisions are such that the spouse can defeat the trust and take absolute ownership of the IRA, then the spouse can do a spousal rollover. In the case of a QDOT, that would be a taxable event.

Distributions continue on single recalculated life of spouse. Disclaimer is ignored. When she dies, all money must come out before 12/31 of year after death.

[[Can you still recharacterize back to a traditional IRA?]] Under current rules, not after Oct 15th. This is still the area of concern, inasmuch as it causes you to have no IRA of any type, not to mention early distribution penalty and excess contribution penalty.