Unit 24 Quizzes

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*******Under UTMA, which of the following are allowable distributions for the benefit of the minor? A) A percentage of food expense B) The cost to attend a summer camp C) A percentage of housing expenses, such as the utilities for his bedroom D) Clothing expense for child who has gone thru a growth spurt

********B You cannot use UTMA (or UGMA) money for the basics of food, clothing and shelter; those are the responsibility of the parent. An optional expense, such as summer camp, vacation, sports league registration, would be permitted.

An employer-sponsored retirement plan that pays a specific benefit to participants at their normal retirement age is A) a defined benefit plan B) a supplemental employee retirement plan C) a defined contribution plan D) a section 401(k) plan

A A traditional defined benefit plan promises to pay a specific benefit to a participant at his normal retirement age as specified by the plan document.

Which of the following circumstances may cause a person to be identified as a fiduciary? I Investment adviser representative who becomes a trustee II Investment adviser representative who becomes a member of the board of directors of a foundation III Investment adviser representative who holds himself out as a fiduciary for ERISA plans and pensions IV Investment adviser representative who manages a discretionary account A) I, II, III, and IV B) I and IV C) II and III D) I, II, and IV

A All of these statements are correct. Trustees, board members of a foundation, IARs who exercise and those who hold themselves out as a fiduciary for an ERISA plan will generally find themselves being defined as a fiduciary.

Which of the following phrases best describes a prudent investor? A) A trustee who invests with reasonable care, skill, and caution B) The custodian for a minor under the Uniform Transfers to Minors Act C) An investment adviser representative handling a discretionary account D) A person in a fiduciary capacity who invests in a prudent manner

A Although all of these may have a fiduciary responsibility; the definition, as expressed in the Uniform Prudent Investor Act of 1994, requires reasonable care, skill, and caution.

Which of the following securities is the least suitable recommendation for a qualified money purchase plan account? A) Investment-grade municipal bond B) Treasury bond C) Large-cap common stock D) A-rated corporate bond

A Investment-grade municipal bonds bear low yields that are federally tax exempt. Because money in a qualified retirement plan account grows tax deferred regardless of the investment instrument, tax-exempt securities are unsuitable.

The requirement to take a minimum distribution once the age of 72 has been reached is found in A) a traditional IRA B) a qualified employer-sponsored plan even when still working for that employer C) an index annuity D) a Section 529 plan

A Those who have a traditional IRA must begin distributions by April 1 of the first year after reaching age 72. There are RMDs for qualified corporate plans; however, they do not go into effect until after the employee retires from that employer, even if that is well past age 72.

If an individual makes a withdrawal from her IRA at age 52, she pays no penalty tax if she A) used the funds for her nephew's college tuition B) is disabled C) had no earned income that year D) has retired

B An individual may withdraw from an IRA before the age of 59½ without a penalty tax in the case of death or disability. Funds may be withdrawn without penalty for qualified education expenses for immediate family members, but that *does not include nieces and nephews.*

Your married client has an AGI of $105,000 per year and is covered by his employer's defined benefit pension plan. When inquiring about opening a Roth IRA, you would respond that A) the client's earnings exceed the Roth limits so the plan could not be opened B) the client could open the Roth IRA without any restriction C) the client could open a Roth but, depending on future earnings, might not be able to deduct all of the annual contribution D) one cannot be a participant in a qualified plan and a Roth IRA at the same time

B As long as a married couple's AGI does not exceed 208,000 (for 2021), a Roth IRA can be opened without any restrictions. Contributions are never deductible. "one cannot be a participant in a qualified plan and a Roth IRA at the same time" not true- trying to trick you in relation to traditional IRA, but even with a traditional IRA you can have both but contributions may not be deductible

***IRAs and Keogh plans are similar in the following ways except A) deferral of taxes B) identical amounts of contributions are allowed C) distributions without penalty can begin as early as age 59½ D) there is a 50% tax penalty for insufficient distributions

B IRAs and Keogh plans do not have identical contribution amounts; IRAs allow a maximum of $6,000 per individual or $12,000 per couple per year (with a catch-up of $1,000 for each individual aged 50 or older), whereas Keogh plans allow substantially more. Both IRAs and Keoghs allow tax-deferred growth until the individual withdraws the funds. IRAs and Keoghs have premature distribution penalties before age 59½. Once the participant reaches 72, required minimum distributions must be made or a 50% tax penalty will be assessed.

Which of the following regarding a Roth IRA are TRUE? I The contributions are nondeductible. II One may not contribute to a Roth IRA if concurrently contributing to a traditional IRA. III The contributions are deductible. IV Withdrawals after age 59½ may be tax free. A) II and III B) I and II C) I and IV D) III and IV

C In a Roth IRA, contributions are not deductible from current income. Withdrawals after age 59½ are tax free, provided the account has been open for at least 5 years. One may maintain both a Roth and a traditional IRA concurrently. However, the maximum total contribution between both plans is $6,000 (or $7,000 for those age 50 or older).

One of your clients wishes to reallocate the assets in his 401(k) plan. Specifically, he plans to assist his parents in the purchase of a retirement home. He claims that it makes sense to have about 10% of his plan assets in real estate. A) An asset allocation model would not have 10% in real estate. B) This would only be permitted if the home were for his personal use. C) This is not permitted because a prohibited party will benefit. D) This is prohibited as qualified plans cannot own real estate.

C There are two problems here. First of all, any investment in a qualified plan (or IRA), must be for future use (or else it would be considered a distribution subject to tax). Second, real estate may be used prior to your retirement, but not by "related" parties

All of these would be characteristics of a traditional 401(k) plan EXCEPT A) employees may have a portion of their contribution matched by the employer B) in-service employees may be eligible for hardship withdrawals C) employees can choose from a variety of investment options D) the employer can contribute more than 25% of total payroll

D 401(k) plans provide for hardship withdrawals, a choice of investment options, and employer matching. Although there are exceptions to this, in general (and on the exam), you will have to know that the employer share of the contributions to a traditional 401(k) plan (or any other DC plan) may NOT exceed 25% of total payroll.

Under the minimum distribution rules, Jason is required to take a minimum distribution of $10,000 this year from his IRA. However, a distribution of only $8,000 has been made. What is the dollar amount of penalty that may be assessed in this situation? A) $200 B) $4,000 C) $2,000 D) $1,000

D 50% Penalty on $2,000 not distributed.

Qualified Plans - Contributions tax deductible - Plan approved by the IRS - Plan cannot discriminate - Subject to ERISA - Tax on accumulation is deferred - All withdrawals taxed - Plan is a trust Ex) 401(k) plans, 403(b) plans, profit-sharing plans, and Keogh (HR-10) plans. - Although pre-591⁄2 withdrawals from IRAs for education and first-time home purchase escape the early withdrawal penalty, withdrawals from qualified plans for those purposes do not. - Can be withdrawn before 59.5 without 10% penalty for death, disability, or substantially equal periodic payments under IRS Rule72(t)

Nonqualified Plans - Contributions not tax deductible - Plan does not need IRS approval - Plan can discriminate - Not subject to ERISA - Tax on accumulation is deferred - Excess over cost base taxed - Plan is not a trust Ex) Payroll deduction plans, deferred compensation plans,

A participant in an ERISA qualified retirement plan is studying the investment policy statement (IPS) prepared by the plan's fiduciary. The contents of the IPS would not include A) methods for monitoring procedures and performance B) specific security selection C) investment philosophy including asset allocation style D) determination for meeting future cash flow needs

B One thing that could never be in an IPS is a listing of the securities that will be purchased in the future. Types of securities, yes, but not the specific ones.

*****Maria, age 49, was discussing with some coworkers the recent family vacation she took. She commented that she was able to afford it by taking a penalty-free withdrawal from her retirement plan. Based on that statement, Maria must be covered under A) a 401(k) plan. B) a defined benefit plan. C) a 457 plan. D) a 403(b) plan.

*****C The 457 plan is unique in that it is the only tax-qualified retirement plan permitting withdrawals, for any reason, before reaching 59½ without penalty. All qualified plans have exceptions to the 10% penalty tax, but only the 457 allows the withdrawals for any reason. Even though there is no early distribution tax, Maria will still owe ordinary income tax on the amount withdrawn - the 457 benefit is only that there is no additional 10% tax.

***A 457 plan could cover which of the following? I Employees of a corporation II Independent contractors providing services to the county III Employees of a non-incorporated business IV City employees A) II and IV B) I and III C) I and IV D) II and III

***A The 457 plan is a nonqualified deferred compensation plan for municipal employees, as well as for independent contractors performing services for those entities. The 457 plan is unique in that it is the only tax-qualified retirement plan permitting withdrawals, for any reason, before reaching 59½ without penalty.

A prospective client has been interviewing a number of investment advisers and wishes to see your firm's investment policy statement. Your IPS would probably include which of the following headings? I Investment objectives II Investment philosophy III Investment selection criteria IV Monitoring procedures A) I, II, III, and IV B) I and II C) I, III, and IV D) II and IV

A Although there are no rules requiring that an IA develop an investment policy statement, it is a recommended procedure. Each of these 4 items would be found in a typical IPS. Please note that the IPS would include the criteria for selecting investments, but not the listing of the actual investments themselves.

Where would you be most likely to find an IPS? A) Defined benefit plan B) GRAT C) IRA D) SPD

A The investment policy statement (IPS), although not required under Department of Labor (DOL) rules, is generally found in corporate qualified plans, such as the defined benefit or defined contribution plan. Because the investor manages the IRA, there is no need to prepare an IPS for participants to review.

Terry Bolton employs his 2 sons in the family gardening business. Josh is 12 years old and was paid $2,000 for the year. Drake is 14 years old and was paid $3,000 for the year. Which of the following are correct statements regarding the taxation of the income? I Josh's income is taxed at his tax rate. II Drake's income is taxed at his tax rate. III Josh's income is taxed at trust tax rates. IV Drake's income is taxed at trust tax rates. A) I and IV B) III and IV C) II and III D) I and II

D As the money paid is earned income, it is not subject to the kiddie tax rules, regardless of age.

To comply with the safe harbor requirements of Section 404(c) of ERISA, the trustee of a 401(k) plan must I offer plan participants at least 10 different investment alternatives II allow plan participants to exercise control over their investments III allow plan participants to change their investment options no less frequently than monthly IV provide plan participants with information relating to the risks and performance of each investment alternative offered A) I and III B) I and IV C) II and IV D) II and III

**C To comply with the safe harbor provisions of ERISA's Section 404(c), the plan trustee must allow each participant control over her investments and furnish her with full performance and risk information. The rule only mandates a minimum of 3 alternatives and quarterly changes.

What is the maximum amount a taxpayer may contribute each year to a Coverdell Education Savings Account (ESA) for one student? A) $2,000.00 B) $500.00 C) $100.00 D) $1,000.00

A The most an individual may contribute to an ESA for one student is $2,000 per year. There is no limit on the number of students on whose behalf a taxpayer may contribute, however. A taxpayer with 5 grandchildren could contribute a total of $10,000 to 5 ESAs

A single individual earning $250,000 a year may I open a Coverdell ESA II not open a Coverdell ESA III open a 529 college savings plan IV not open a 529 college savings plan A) I and III B) II and III C) II and IV D) I and IV

B There are income limits that apply to Coverdell ESAs. Single individuals earning more than $110,000 per year are not permitted to open a Coverdell account, and married couples lose the ability to contribute when earnings exceed $220,000. However, there are no income limits restricting who is eligible to open and contribute to a Section 529 college savings plan.

Dr. Smith is resigning from the clinic where he was an employee covered under its profit-sharing plan. The plan document requires distribution of vested amounts once an employee leaves the clinic. Under the Internal Revenue Code, what can he do to avoid current-year taxation of the distribution? A) Invest the distribution in municipal bonds B) Invest the distribution in a government zero-coupon bond C) Roll over the distribution into an IRA within 60 days D) Place the distribution in a Keogh Plan

C Lump-sum distributions from retirement accounts can be rolled over into an individual retirement account. If implemented within 60 days, no tax liability is incurred.

Which of the following investments could be found in an UTMA but not an UGMA? A) Bonds B) Preferred stock C) Real estate D) Sector mutual fund

C The Uniform Transfer to Minors Act (UTMA) allows virtually any kind of asset, including real estate, to be transferred to a minor. UGMA accounts, on the other hand, are limited to gifts of cash, securities (such as stocks, bonds, or mutual funds), and insurance policies.

Which of the following statements regarding both traditional and Roth IRAs is true? A) Withdrawals at retirement are tax free. B) Distributions must begin in the year after the owner reaches age 72. C) Contribution limits are the same. D) Contributions are tax deductible.

C The common factor for both traditional and Roth IRAs is that contribution limits are identical. Roth contributions are made with after-tax dollars rather than pre-tax dollars (the usual case with a traditional IRA). On the other hand, it is only the Roth where, assuming the conditions are met, the withdrawals are tax-free. There are no RMDs for Roth IRAs.

The child of one of your clients is headed off for a year of graduate study at the University of Oxford in England. The Section 529 plan used to fund the child's undergraduate study still has about $20,000 in the account. Because Oxford is on the U.S. Department of Education's list of approved institutions, qualified expenses would include which of the following? A) Dues to sports clubs or societies B) Textbooks used to supplement the required reading assignments C) The full cost of an off-campus luxury apartment D) The full cost of tuition and required fees

D The list of qualified expenses is rather small and includes mandatory tuition and fees, as well as room and board on campus. If off-campus, the qualified portion is limited to basically the amount that would be charge for on-campus accommodations. Although required textbooks are qualified, any texts purchased to supplement one's study are not.

***One of your clients has reached his company's mandatory retirement age of 67. He has been a participant in his employer's 401(k) plan and his account is valued at $400,000. The account is funded with mutual funds and company stock. The cost basis of the company stock is $25,000 and it is currently worth $125,000. If he were to rollover the entire account into an IRA, the tax treatment would be A) no current tax, but any withdrawals would be taxed as ordinary income B) no current tax, but any withdrawals representing the gain on the company stock would be taxed as long-term capital gains C) current tax at ordinary income rates on the unrealized appreciation of the company stock, ordinary income rates on the balance when withdrawals are taken D) no current tax on the portion applicable to the mutual funds; ordinary income on the cost basis of the company stock; and long-term capital gains on the unrealized appreciation of the company stock when it is sold

***A As with any rollover from a qualified plan to an IRA, there is no current tax, but withdrawals are taxed at ordinary income tax rates. If the client had taken advantage of the NUA (net unrealized appreciation) approach, taking the company stock and putting it into a taxable account would have resulted in ordinary income tax on the $25,000 cost basis, and long-term capital gain rates on the appreciation whenever the stock was sold.

Jason, a recently divorced individual, is currently 55 years old and has built up approximately $400,000 in several initially funded and rollover individual retirement accounts (IRAs). He now wants to take an early distribution from one of these IRAs. Which one of the following distributions will escape the imposition of a tax penalty for early withdrawal? A) A distribution made in payment for higher-education costs of Jason's granddaughter B) A distribution made to Jason's ex-wife under a qualified domestic relations order (QDRO) C) A distribution made upon separation of service from Jason's current Employer D) A distribution made on account of financial hardship as determined by Jason's financial planner

A Jason can take a distribution from any of his IRAs without imposition of a tax penalty as long as it is made in payment of higher-education costs (tuition, fees, books, supplies, and equipment) for his granddaughter. QDROs do not apply to IRAs. "QDROs apply only to qualified plans and, therefore, if the ex-spouse withdraws funds from the 401(k) prior to age 59½, it will generally qualify for the exemption from the 10% penalty." Separation from service will not affect Jason's ability to take a distribution from his IRA. A distribution due to financial hardship is always subject to the early distribution penalty if the participant is not yet age 59½.

If a 40-year-old customer earns $65,000 a year and his 38-year-old spouse earns $40,000 a year, how much may they contribute to IRAs? A) They may not contribute because their combined income is too high. B) They may each contribute 100% of earned income or the maximum annual allowable dollar limit, whichever is less, to an IRA. C) They may contribute up to the maximum annual allowable dollar limit split evenly between both accounts. D) Only the higher wage earner may contribute to an IRA.

B No matter how much income individuals or couples receive, they may contribute to their IRAs if they have earned income. Each is entitled to contribute 100% of earned income up to the maximum allowed. *However, if either or both of them are covered under a qualified plan, limits may exist on the deductibility of the contributions.*

A disadvantage of a defined benefit pension plan to the employee is that A) the risk of fund performance is borne by the employer. B) the funds are an integral part of the retirement planning process. C) at retirement, the employee may not be earning as much as when she was at her peak earning power. D) the individual is guaranteed a payout at the time of her retirement by her employer.

C In defined benefit pension plans, the retirement benefit is based on two factors: the final salary and the number of years of service. In some cases, earnings are reduced in those final years before retirement as the employee moves to a less stressful position. Because the benefit is defined, the employer bears the investment risk.

Tammy Jones is retiring from her company next month on her 62nd birthday. Her 401(k) has $300,000 and offers her 4 different mutual funds. After calculating what she will receive from Social Security, she concludes that she will need an additional $500 a month to retain her current lifestyle. Which of the following would be the most appropriate recommendation? A) Roll the money into a mutual fund withdrawal plan B) Roll the money into a traditional IRA C) Take a lump-sum distribution of the entire $300,000 D) Leave the money in her current 401(k) account

B It would benefit Ms. Jones most to roll the money into a traditional IRA. By doing this she would defer paying taxes on the $300,000—something she could not avoid if she took the lump-sum distribution or rolled the money into a mutual fund withdrawal plan. Although the decision to roll over into a self-directed IRA or leave the funds in the 401(k), if permitted, is one worthy of consideration, with only 4 mutual funds being offered in Ms. Jones's 401(k) account, most would agree that the increased options available in the IRA make that the better choice.

********You have a 62-year-old client who opened a Roth IRA with your firm one year ago. The account was funded with a $6,500 deposit and the account's value is now $7,500. The client has another Roth, opened eight years ago at another firm. The client would like to withdraw $7,000 from this account rather than the one at the other firm. The tax consequences of this withdrawal would be A) no tax. B) ordinary income tax on the $500 that exceeds the original cost. C) ordinary income tax on the $1,000 growth because the account has not been open for 5 years. D) ordinary income tax on the entire amount because the account has not been open for 5 years.

**********A An individual can always withdraw the initial principal in a Roth without tax or penalty - it is only the earnings that will be subject to tax if not meeting the requirements of the Internal Revenue Code. In order for withdrawals of earnings from a Roth IRA to be free of any tax, there are two primary requirements: The first is that the owner be at least 59½ years of age. The second is that it is at least 5 years since the first deposit to a Roth IRA in the individual's name. Both of those conditions are met here. The client is 62 and the initial Roth IRA deposit was made 8 years ago. It is irrelevant which account the money is taken from as long as there is an account that has been open for at least 5 years.

Which of the following statements are TRUE about both an individual Roth IRA and a Roth 401(k) plan? I. Contributions are made with after-tax dollars. II. One must have AGI below a certain level in order to maintain either Roth. III. If all the conditions are met, withdrawals are tax free. Iv. There are no RMDs at age 72. A) I and II B) I and III C) III and IV D) II and IV

****B In any Roth plan, contributions are made with after-tax dollars, and assuming all conditions are met, withdrawals are tax-free. *However, unlike the individual Roth IRA, there are no earnings restrictions on participants in a Roth 401(k) plan and RMDs must begin at age 72.*

****Which of the following statements regarding IRAs are CORRECT? I One may have both a Roth IRA and a traditional IRA, contributing the maximum to each one. II One may have both a Roth IRA and a Roth 401(k) contributing the maximum to each one. III Both traditional IRAs and Roth 401(k) plans have RMDs at age 72. IV If one is a participant in a Roth 401(k) plan, the earnings limits are waived for opening a Roth IRA. A) I and IV B) I and II C) II and III D) III and IV

****C A Roth IRA and Roth 401(k) are 2 separate items, and maximum allowable contributions may be made to both. This is unlike the IRAs, where one can maintain both but the total contribution is the annual limit (currently $6,000 with a $1,000 catch-up). One of the things about a Roth 401(k) that is different from the Roth IRA is that RMDs must start at the same time as with traditional IRAs. *Although one may participate in a Roth 401(k) without regard to AGI limits, that is not so with the Roth IRA.*

****A 45-year-old employment counselor has a Keogh plan for himself and 3 full-time employees who have been working for him for the past 4 years. If he earns $150,000 this year and contributes the maximum amount allowed to his Keogh plan, how much may he invest in an IRA? A) He may invest any amount up to 100% of his earned income. B) He may not have an IRA. C) He may have an IRA but may not make a contribution for this year. D) He may contribute 100% of earned income or the maximum allowable IRA limit, whichever is less.

****D Regardless of how much is invested in a Keogh plan, an investor may still invest in an IRA if he has earned income. The maximum contribution to an IRA is 100% of earned income or the maximum allowable limit, whichever is less. In this individual's case, however, the contribution would probably be nondeductible. IRAs allow a maximum of $6,000 per individual or $12,000 per couple per year (with a catch-up of $1,000 for each individual aged 50 or older), whereas Keogh plans allow substantially more.

***One of your clients has just completed a divorce. The client is a participant in a 401(k) and has a traditional IRA. The divorce settlement includes a QDRO providing for half of the client's account to go to the ex-spouse. The ex-spouse also receives half of the client's IRA. With regard to the ex-spouse, which of the following statements is correct? A) Withdrawals from the 401(k)prior to age 59½ may be subject to the 10% penalty. B) Withdrawals from the IRA prior to age 59½ may be subject to the 10% penalty. C) The name of the former spouse must appear on the ex-spouse's IRA. D) The ex-spouse has 60 days to rollover the distribution.

***B QDROs apply only to qualified plans and, therefore, if the ex-spouse withdraws funds from the 401(k) prior to age 59½, it will generally qualify for the exemption from the 10% penalty. In the case of withdrawals from the IRS, unless due to one of the allowable exceptions (death, disability) the 10% tax penalty applies. When there is a divorce and an IRA is split, the ex-spouse now has an IRA in his or her name with no mention of the previous owner. There is technically no distribution so there is nothing to rollover.

**During your annual review with your clients, Matt and Sally Eberhart, they indicate that they think it is time to start putting away some money for college for their 3-year-old son. They ask you to describe the advantage of using an UTMA account over a Coverdell ESA. You would likely point out all of the following as advantages EXCEPT A) there is no limit to the amount that can be contributed to an UTMA B) there are no earnings limits for making UTMA contributions C) withdrawals for other than qualified education expenses are not subject to any penalties D) contributions to the UTMA are made with after-tax dollars

**D We're looking for a feature possessed by the UTMA that is not found in an ESA, but in both cases, contributions are made with after-tax dollars. Unlike the ESA, where there is a 10% tax penalty on the earnings withdrawn for nonqualified educational expenses, no such penalty applies to an UTMA.

One of the ways that individuals can accumulate funds for retirement is through individual retirement arrangements (IRAs). There are a wide range of investments eligible for inclusion in an IRA and would include all of the following except A) exchange-traded funds. B) fixed annuity contracts. C) life insurance contracts. D) specified collectibles.

C Life insurance policies are prohibited investments in an IRA and, in general, collectibles are prohibited as well. There are some important exceptions to the collectible prohibition. The IRS states that an IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion.

When Felicity died, she left her estate, including her IRA, to her daughter, Courtney. Because of her financial circumstances, Courtney decided to abjure the inheritance. This would lead to her A) accepting the estate B) contesting the estate C) becoming the executrix of the estate D) disclaiming the IRA

D When one wishes to refuse the receipt of an IRA, the procedure is known as disclaiming the IRA. Nonspouse Beneficiary: unlike the spouse, the beneficiary will NOT be allowed to rollover the inherited IRA into their own IRA. - There are 4 options 1.) Take the cash now: included in taxable income that year 2.) Cash out the IRA in five years span - If the deceased was younger than 70.5 - each withdrawal will be included in taxable income (once again, assuming all contributions were pretax) during the year the funds are withdrawn 3.) Take out required minimum distributions over the beneficiary's own life expectancy 4.) Disclaiming an IRA Believe it or not, some people who inherit IRAs don't want the money. Spousal Beneficiary: When the beneficiary is the spouse, there are two choices that can be made: 1.) Do a spousal rollover, meaning the amount of the inheritance is rolled over into the spouse's own IRA - logically, as your own with all of the normal rules applying (withdrawal ages, RMDs, and so forth). That means that if the spouse is younger than 591⁄2, any distributions before then will be subject to the 10% penalty 2.) Continue to own the IRA as the beneficiary - then there is no 10% penalty for withdrawals before age 59.5 - bad news is that RMDs (from a traditional IRA or SEP IRA) must begin when the deceased would have had to take them - However, the RMDs will be computed based on the beneficiary's age, not that of the deceased. -If it is a Roth IRA and the account hasn't been open for at least five years, any withdrawal of earnings will be subject to income tax *but not the 10% penalty.*


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