Chapter 18



Chapter 9

Estate and Retirement Planning with Qualified Plans and IRAs

LEARNING OBJECTIVES:

A. Have a basic understanding of estate and retirement planning with qualified plans and IRAs, including advantages, disadvantages, and tax implications.

REVIEW:

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. Some issues at retirement are then discussed, including rollovers versus keeping it in the plan, planning retirement distributions, and estate planning. The chapter finishes with a short summary.

Chapter Outline:

A. What Is It?

B. When Is It Indicated?

C. Advantages

D. Disadvantages

E. Tax Implications

E. Issues at Retirement

1. Rollover or Keep in Plan

2. Planning Retirement Distributions

3. Estate Planning

F. Summary

G. Where Can I Find Out More About It?

H. Chapter Endnotes

FEATURED TOPIC:

Estate and retirement planning with qualified plans and IRAs

CFP® CERTIFICATION EXAMINATION TOPIC: NONE

COMPETENCY:

Upon completion of this chapter, the student should be able to:

1. Have a basic understanding of estate and retirement planning with qualified plans and IRAs, including advantages, disadvantages, and tax implications.

KEY WORDS:

rollover, conversion, frozen plan, required minimum distributions, beneficiary designation

DISCUSSION:

1. Discuss the advantages and disadvantages and tax implications of estate and retirement planning with qualified plans and IRAs.

2. Discuss rollovers versus keeping it in the plan.

3. Discuss required minimum distributions after death.

4. Discuss estate planning for qualified plans and IRAs.

QUESTIONS:

1. If the participant dies at age 60 without a designated beneficiary, minimum distributions must be made

a. over the life expectancy for age 60 under the uniform lifetime table

b. over the life expectancy for age 60 under the single life table

c. over the life expectancy for age 61 under the single life table

d. under the five year rule

Chapter 9, p. 95

2. It may be advantageous to a participant to keep retirement assets in a qualified plan, rather than rolling assets over to an IRA, for all but which of the following reasons?

a. no spousal consent requirement for IRA

b. investing in life insurance

c. PBGC insurance may be available

d. plan loans may be available

Chapter 9, p. 90

3. Pat is considering converting a traditional IRA to a Roth IRA in 2009. Pat cannot make a conversion if

a. Pat is not married

b. Pat is married and files a separate return

c. Pat is married and files a joint return

d. Pat has income of $75,500

Chapter 9, p. 90-91

4. Which of the following is not a requirement for a trust to be treated as a designated beneficiary for required minimum distribution purposes?

a. trust must be revocable

b. beneficiaries must be identifiable from trust document

c. documentation of trust provisions must be provided to plan administrator

d. trust must generally be valid under state law

Chapter 9, p. 96

ANSWERS:

1. d

2. a

3. b

4. a

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