FHCE4210 UNIT 7

Following the death of the owner of a traditional IRA, if no beneficiary is determined by the required date how must the IRA balance be distributed?

Over the longer of 5 years OR the remaining life expectancy of the owner-participant, reduced by 1 for each subsequent year.

Under a divorce decree, the assignment of the right to receive benefits from a qualified retirement plan by a court to the former spouse of a participant is referred to as

QDRO

Mike is age 69 and his spouse Kathy is 64. If Mike dies, what is the best option for his IRA if Kathy wants to delay distributions as long as possible?

Rollover his IRA to her IRA and take distributions based on her own required beginning date (age 70.5)

In order to avoid a government mandate regarding the qualified plan distribution period for non-spousal beneficiaries, a qualified plan participant's designated beneficiary must be determined by

September 30th

T/F? : If the participants death occurs after retirement, a qualified plan must protect the plan participant's spouse by requiring that the normal form of distribution from the retirement plan for a married participant must be a joint & survivor annuity (w/ the exception of certain profit-sharing plans).

True

T/F? : If the participants death occurs before retirement, a qualified plan must provide a spousal benefit called a "qualified preretirement survivor annuity (QPSA)" (w/ the exception of certain profit-sharing plans).

True

T/F? : In regards to required minimum distributions (RMDs) from a Roth IRA following the death of the act owner, the same required minimum distribution rules apply to the Roth IRA as apply to a traditional IRA when death occurs prior to the required beginning date.

True

T/F? : A disadvantage of Carol, a 45 year old widow with no children, in considering naming her estate as the beneficiary of her traditional IRA is that her estate cannot be treated s a designated beneficiary for purposes of determining the required minimum distributions after she dies.

True.

T/F? : A participant may receive an in-service distribution from a profit-sharing plan.

True.

John is married to Billie. They have been married for the past 30 years and have 2 minor children. John has recently received an offer from his employer for an early retirement package. One of qualified pension plan payout options is a single life annuity. Which of the following statements regarding John's distribution options is (are) correct? 1. John can elect a single life annuity w/o spousal approval. 2. A single life annuity would provide the largest monthly amount of payout. 3. To accept a single life annuity, John must inform Billie but does not have to obtain her consent. 4. To accept a single life annuity, John must obtain a signed, written waiver from Billie.

2 & 4

Ann, age 50, is the beneficiary of her father's traditional IRA, which was funded entirely by tax-deductible contributions. Her father recently died at age 76. What can happen?

Ann may execute a direct transfer of the act balance into an inherited IRA and must begin required minimum distributions by 12/31 of the yr following the yr of her fathers death.

Steve has died and named only his adult daughter Sarah as the designated beneficiary of his qualified plan account balance. Steve had not yet started making RMDs from this account since he died at 64. When must Sarah begin taking distributions from Steve's account to stretch the balance over her life expectancy?

By 12/31 of the year following Steve's death.

Bernard recently passed away at age 64 before beginning distributions from his ER's money purchase plan. Bernard was a single individual throughout his life and named his estate as the beneficiary of his accrued plan benefit. Over what time period must this benefit be distributed, if at all?

By calendar year end of the 5th year after the date of Bernard's death.

Post-death distributions of a traditional IRA interest to a qualifying charity as beneficiary will be subject to what kind of taxes?

It will NOT be subject to ordinary income tax as income in respect of a decedent.

Mike is age 69 and his spouse Kathy is 64. If Kathy dies before Mike, what is the best possible option for her IRA if Mike wants to delay distributions as long as possible?

Keep the assets in her IRA and take distributions when Kathy would have reached age 70.5

All of the following form of qualified plans must generally provide for a QJSA form of benefit EXCEPT: a cash balance pension plan an ESOP a profit-sharing

ESOP

T/R? : An estate can be treated as a designated beneficiary of a traditional IRA.

False, it cannot.

T/F? : Beverly's husband, age 67, dies with a $1.2 million balance in his traditional IRA. Beverly is the designated beneficiary. She is currently 55 years old and has a life expectancy of 30 years. When she was younger, Beverly ran a consulting business, which allowed her to contribute a significant amount of money to a self-employed Keogh plan. When she closed her business, she rolled over the plan balance into her own traditional IRA. Beverly's only option is to withdraw the funds from her husband's IRA using the five-year rule.

False, she can roll over his traditional IRA funds to her own traditional IRA.

Valerie, an unmarried indv, recently died at age 74, leaving behind an IRA with a FMV of $200k. She began taking RMDs after attaining age 70.5 and correctly report the same on her income tax returns. Before her death, Valerie named her grand daughter, Dawn, as the designated beneficiary of her IRA. Now that Valerie has died, Dawn has come to you for advice with respect to how these IRA benefits should be distributed. What do you tell her?

In the year following Valerie's death, Dawn must begin taking distributions from the IRA over Valerie's remaining life expectancy, reduced by 1 each subsequent year.

When there is more than 1 designated beneficiary, which life expectancy is used as the measuring life for purposes of determining the distribution period?

The beneficiary with the shortest life expectancy.

T/F? : A non spouse beneficiary following the death of a traditional IRA owner may rollover the distribution into an IRA the non spouse has previously established and funded.

True

T/F? : Beverly's husband, age 67, dies with a $1.2 million balance in his traditional IRA. Beverly is the designated beneficiary. She is currently 55 years old and has a life expectancy of 30 years. When she was younger, Beverly ran a consulting business, which allowed her to contribute a significant amount of money to a self-employed Keogh plan. When she closed her business, she rolled over the plan balance into her own traditional IRA. She is able to roll her deceased husband's traditional IRA over to her own traditional IRA.

True

T/F? : Distributions made to an alternate payee under a QDRO are subject to income tax.

True

Maria has a traditional IRA valued at $500k. Her daughter, Faith, is named as beneficiary for the acct. If Maria dies premature, that can't Faith do with the plan?

faith CANNOT rollover the IRA into her own section 401(k) plan.

Distributions made to an alternate payee under a QDRO do not what?

subject the payor to the 10% penalty tax on premature distributions.