Life and Death Planning for Retirement Benefits

Table of Contents

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2.6.08 Avoid some rollover requirements with IRA-to-IRA transfer........................................ 146 2.7 R ETIREE R OAD M AP ........................................................................................................... 147 2.7.01 Plan-related issues to discuss with your client................................................................ 147 2.7.02 Reasons to roll money from one plan or IRA to another ................................................ 148 2.7.03 Best how-to rollover tips................................................................................................. 149 2.7.04 How many IRAs should a person own?.......................................................................... 149 2.7.05 How to take RMDs and other distributions .................................................................... 150 CHAPTER 3: MARITAL MATTERS ................................................................................... 151 3.1 C ONSIDERATIONS FOR M ARRIED P ARTICIPANTS ............................................................ 151 3.1.01 Road Map: Advising the Married Participant ................................................................ 151 3.1.02 Road Map: Advising the Surviving Spouse .................................................................... 152 3.1.03 Simultaneous death clauses............................................................................................. 153 3.2 S POUSAL R OLLOVER ; E LECTION TO T REAT D ECEDENT ’ S IRA AS S POUSE ’ S IRA ........ 154 3.2.01 Advantages and drawbacks of spousal rollover.............................................................. 154 3.2.02 Spousal rollover: QRPs and 403(b) plans ....................................................................... 155 3.2.03 Rollover (or spousal election) for IRA or Roth IRA ...................................................... 156 A. Spousal election: Code and regulations .............................................................. 156 B. Spousal election for inherited Roth IRA............................................................. 156 C. Conditions that must be met ............................................................................... 157 D. How spouse makes the election .......................................................................... 157 E. When spousal election may be made .................................................................. 158 F. Rollovers also permitted ..................................................................................... 158 3.2.04 Roth conversion by surviving spouse ............................................................................. 158 3.2.05 Rollover or election by spouse’s executor ...................................................................... 159 3.2.06 Deadline for completing spousal rollover....................................................................... 159 3.2.07 Plans the spouse can roll benefits into ............................................................................ 160 3.2.08 Rollover if spouse is under age 59½............................................................................... 161 3.2.09 Spousal rollover through an estate or trust ..................................................................... 162 3.3 Q UALIFYING FOR THE M ARITAL D EDUCTION .................................................................. 164 3.3.01 Road Map: Leaving Benefits to Spouse or Marital Trust ............................................... 164 3.3.02 Leaving retirement benefits to a QTIP trust ................................................................... 165 3.3.03 IRS regards benefits, trust, as separate items of QTIP ................................................... 166 3.3.04 Entitled to all income: State law vs. IRS ........................................................................ 167 3.3.05 Ways to meet the “entitled” requirement; Income vs. RMD.......................................... 168 3.3.06 Distribute all income to spouse annually ........................................................................ 169 3.3.07 Do not require stub income to be paid to spouse’s estate!.............................................. 170 3.3.08 Combination marital deduction-conduit trust ................................................................. 171 3.3.09 General Power marital trust ............................................................................................ 171 3.3.10 Automatic QTIP election for “survivor annuities” ......................................................... 171 3.3.11 Marital deduction for benefits left outright to spouse..................................................... 172 3.4 REA ’84 AND S POUSAL C ONSENT ..................................................................................... 172 3.4.01 Introduction to the Retirement Equity Act of 1984 ........................................................ 172