BPickerCPA

The regs don't say that the spouse won't be the beneficiary, just that she will not be permitted to treat the IRA as her own. This treatment does not preclude a rollover. The IRS has permitted rollovers under certain circumstances. Also, a trust can assign the right to receive the IRA proceeds to an individual. In that case the individual will then control the investments in the IRA, and their SSN would be used for the reporting of distributions. This does NOT necessarily mean that the individual will be deemed the designated beneficiary for determining the payout period. These are two separate issues.

There could well be income tax, if you take out earnings at this point. The Roth has to be more than five years old for earnings to be tax free, and that can't happen before 2003.

There are people who have requested rulings from the IRS that would grant permission to reduce the withdrawals to reflect the decline in account balance. No official answer on these requests yet. I did hear unofficially that if one ran out of money, the IRS would not invoke the penalty. (How kind of them).

It's my belief that a spouse beneficiary of a decedent's qualified plan can roll the plan assets into an IRA in the decedent's name with the spouse remaining as the beneficiary. The question is whether it needs to be a pre-existing IRA or can the spouse create a new IRA in the decedent's name. You might need to get a private ruling in any event because without clear cut permission, you might have trouble finding a custodian willing to do it.

Without reading peoples' minds, it appears that the issue is that there is one beneficiary, that of the trust. Normally, that would mean you have no designated beneficiary. Special rules permit you to look through the trust to treat the oldest trust beneficiary as the designated beneficiary. I think beyond that, the IRS doesn't want to have to deal with the trust. Does it make sense? To me it does. I think people tend to complicate things. If you want your IRA to go 1/3 to each child, why do you need a trust?

Al, I've seen many things done many times, all of them wrong. Just remember that ultimately YOU are responsible for the tax return. Ask him if he'll write a memo to you explaining why his position is legally correct, and ask if he'll indemnify you against penalties. He might not be the right pro for your circumstances. Just a thought.

Retirement IS required. The rule is, you have to separate from service in the year you attain age 55, or later. If you retire earlier than that you will have to wait until age 59½ for the penalty free money, unless you meet a different exception.

Once the benefits are assigned out from the trust to D, D's SSN is the reporting number.

Appleby, I think you're confusing two issues. In the PLR, the trust assigned the right to the distribution to D, hence the retitling. There is nothing sinister about this. The assignment and retitling goes on all the time. For example, if the estate was the beneficiary and you had a ten year payout, most likely the estate would assign the right to the IRA to an individual so as not to stay open for ten years. This would not give the individual the right to use their own life expectancy; that's an entirely different issue. It also has nothing to do with spousal rollovers, also an entirely different issue. Barry

Appleby, I don't understand your question. The IRA is retitled in the name of the decedent with the beneficiary's name on the account. Why do you think this is contrary to regulation?

Recharacterizations are based upon value, not the identity of investments. It can get complicated. But basically, if the Roth account only contains assets from this conversion (meaning no other contribution or conversion was made to this account), then recharacterizing 100% of the current value will cancel the conversion.

The son's income is also a factor since there are income limitations for contributing to a Roth IRA.

Gary, Doesn't the SIMPLE have to cover ALL employees, with the exception being union employees covered by a collectively bargained plan? It looks to me like you could not exclude non-union employees from the SIMPLE, and you could not have another plan for the non-union employees, since you generally cannot have any other plan along side a SIMPLE.

Your statement "separate IRA" concerns me. If you roll over only the after tax money to an IRA, and you have no other IRAs, your plan should work. But if you roll the entire plan into IRAs, even if the IRAs are separate, then your plan won't work.

Reg. 1. no 2. yes 3. probably

The trustee is merely a conduit. Once they transmit the money to the IRS, they no longer are in control of it, and therefore cannot refund it.

The bank has the right to make that their policy. There is nothing in the tax law that mandates they do that. If it's their policy, either accept it or move your accounts to another bank.

I always thought that separate accounting was out when a trust was named as the beneficiary, simply because there was only ONE beneficiary, that being the trust. People tend to forget that we're going from a general rule (trust means no designated bene) to a specific exception (a bene of a trust can qualify as an IRA bene if certain rules are met). The tendency them becomes to treat the scenario with a trust as any other bene situation. It's not. Truth is, the IRS has already granted one break. That all being said, I still think you have a shot as separate shares if the TRUST AGREEMENT itself causes the trust to split in to separate TRUSTS after death. But the IRS will not give you separate shares of one trust.

Agree. The final regs fixed this.

Money contributed as annual contributions can be withdrawn at ANY time WITHOUT the 10% penalty. Papogi's statement to the contrary is erroneous.

Bob and I have both spoken to IRS people and have been told the same thing. Bob and I have spoken to each other about these conversations. However, there is a still a difference between an informal conversation and a private letter ruling. Hopefully, in the not to distant future we'll have the PLRs.

There is sometimes a long distance between "might be approved" and an approved PLR.

I know that there are some PLRs pending on this question. I know, because I submitted one of them. To my knowledge, none of them have been published. However there is a 3 month gap between the date a PLR is issued to a taxpayer, and the PLR is published. So it's possible that someone out there has received a positive ruling on this subject, but I'm 99.9% sure that if one were published, I would have seen it.

WMyer's computation ignores the fact the contribution itself is a deduction for computing net income. The example would work if one were talking about a w-2 of $100,000. However if net self employment income were $100,000, the 25% limit would translate to a 20% contribution of $20,000. If you add a 401k for $11K, then the contribution limit will become 20% of $89K. Still not a bad deal to add the 401k.

The dollar limit is $40K, but there is still a percentage limitation of 25% of earned income. You can now use 25% for the profit sharing plan where that limit use to be 15%. Therefore, you can freeze or terminate the money purchase plan, if you desire. Check with your accountant as there may be ramifications if you have employees.