Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

For this idea to work, the child must have compensation income. ¶ 5.3.02 . If a parent pays his toddler a salary for performing household chores, the IRS might maintain that the child has received a gift, not compensation, and that Roth IRA contributions based on this “compensation” are excess contributions subject to a penalty ( ¶ 5.3.05 ). Donating cash to another individual’s Roth IRA is a cash gift and does not create any particular problems. However, if the participant assigns his own Roth IRA by lifetime gift “to another individual,” the gift causes the Roth IRA to be deemed distributed to the owner-donor, and accordingly it ceases to be a Roth IRA. Reg. § 1.408A-6 , A-19.