This chapter begins with a general discussion of estate and retirement planning with qualified plans and IRAs, what it is, when to use it, and advantages and disadvantages. A section on tax implications follows discussing the estate tax, the marital deduction, required distributions, taxation of distributions, and an income tax deduction for estate taxes attributable to the IRA or qualified plan. | What is it? Retirement plans help an individual defer tax, but not avoid tax Large qualified plan or IRA balances can mean potentially large income tax payments estate taxes Complex, technical rules govern distribution of assets from qualified plans and IRAs Copyright 2009, The National Underwriter Company What is it? (cont) Careful planning is necessary to minimize tax payments insure compliance with laws governing asset distribution The courts have generally not given planners the benefit of the doubt Copyright 2009, The National Underwriter Company When is it indicated? Substantial retirement assets at retirement or at death Desire to stretch out distributions and defer income taxation There is a surviving spouse Copyright 2009, The National Underwriter Company Advantages Various advantages to either a rollover or keeping assets where they are Planning can reduce estate tax Planning can stretch out distributions and defer income taxation Copyright 2009, The National Underwriter Company Disadvantages Various disadvantages to either a rollover or keeping assets where they are Failure to name a beneficiary or to plan can lead to increased taxation Copyright 2009, The National Underwriter Company Tax Implications Subject to estate tax Marital deduction Distributions required at age 70½ (or retirement, for qualified plans) Roth IRAs (distributions not required until death) Copyright 2009, The National Underwriter Company Tax Implications (cont) Distributions generally fully subject to income tax (except to extent of nondeductible contributions) Qualified distributions from Roth IRA not subject to income tax Offsetting income tax deduction for estate tax attributable to IRA or qualified plan Copyright 2009, The National Underwriter Company An Issue at Retirement: Rollover vs. Keeping It In the Plan Advantages of a rollover if plan participant is a controlling owner, a rollover may allow termination of the qualified plan; plan contributions | What is it? Retirement plans help an individual defer tax, but not avoid tax Large qualified plan or IRA balances can mean potentially large income tax payments estate taxes Complex, technical rules govern distribution of assets from qualified plans and IRAs Copyright 2009, The National Underwriter Company What is it? (cont) Careful planning is necessary to minimize tax payments insure compliance with laws governing asset distribution The courts have generally not given planners the benefit of the doubt Copyright 2009, The National Underwriter Company When is it indicated? Substantial retirement assets at retirement or at death Desire to stretch out distributions and defer income taxation There is a surviving spouse Copyright 2009, The National Underwriter Company Advantages Various advantages to either a rollover or keeping assets where they are Planning can reduce estate tax Planning can stretch out distributions and defer income taxation Copyright 2009, The National
