IRA Tax Planning - Something New?

[Guest mjl325]

I wanted to see if anybody else is aware of the the account mentioned below. If yes, where would I be able to get some more information. Thanks.

'Large retirement accounts present a tough tax planning problem because they may be subject to both estate tax at death and income taxes for distributions. A relatively new development to be considered for an IRA with a balance of at least $500,000 is a restricted management account (RMA). The purpose of an RMA is to provide management of the funds for long-term return. An incidental benefit of the arrangement is to receive a valuation reduction of 30 - 40% for estate tax reporting.'

I have not heard of such a develpment so I'm a bit skeptical but the regs have changed so often recently, its hard to rule anything out. Any assistance is appreciated.

Thanks.

[mbozek]

Fed estate tax only applies if the decendents estate including the IRA exceeds 1.5 mil (2.0 mil in 06) and spouse is not the beneficary of the IRA. I am interested in what kind of discounts are available since IRS position is that valuation discounts are not applicable to IRAs. I suspect that the RMA will invest in privately held and illiquid funds in which the IRA will be a minority owner (and will charge high mgt fees) which would allow the estate to claim a valuation discount. (Why would IRA owner want to invest in a fund that does not have liquidity?) There is no guarantee that the IRS will accept the discount if the estate is audited. If estate is below 1.5m/2.0m there is no need for valuation discount.

[Guest mjl325]

Thanks MJB. Still curious though, is this 'RMA' something that you have heard of before? Or does it sound like an opportune advisor advertising something that really isn't there....neither myself or others that I've spoken with have heard of this type of account or 'new' development.

Thanks again.

[mbozek]

Nope. The advisor is putting a spin on a private investment product to get the attention of potential customers. However, the promoter can not guarantee that the estate will receive a 40% valuation discount from the IRS.

[Mary Kay Foss]

I first heard about these accounts a few years ago at an AICPA Estate Planning Conference. Roy Adams who does a lot of speaking about Estate Planning matters gave the presentation.

My clients do not have enough assets for them to have been solicted about this idea but it's definitely out there. I thought that the IRS had commented on it recently, but I could be mistaken.

[Guest mjl325]

Hi Mary,

Would you know where I could get some more infomration on it? I can't seem to find any relevant documents or comments anywhere.

Thanks