Retirement Tax Planning Summary
- § 1.00 Introduction
- —–[1] Summary of Tax Planning Ideas and Techniques
- —–[2] The Key Role of Qualified Retirement Plans
- —–[3] Tax-Favored Plans for Government Employees
- —–[4] Tax-Favored Plans for Employees of Tax-Exempt Organizations
- —–[5] Nonqualified Employer Retirement Plans
- —–[6] Individual Retirement Arrangements (IRAs and Roth IRAs)
- —–[7] Designated Roth Accounts
- —–[8] Retiring Partners and Sole Proprietors
- —–[9] The Role of Personally Purchased Annuities
- § 1.01 Initial Tax Planning for Retirement
- —–[1] Initial Considerations for Retirement Tax Planning
- —–[2] Payment Options Under Employer Retirement Plans
- ———-[a] Payment Options in General
- ———-[b] Non-tax Considerations Affecting Choice of Payment Option
- ———-[c] Taxation of an Annuity Payable over One or More Lifetimes
- ———-[d] Taxation of Required Spousal Annuities
- ———-[e] Taxation of Distributed Annuity or Life Insurance Contracts
- ———-[f] Taxation of a Lump Sum Distribution of the Entire Amount of Benefits
- ———-[g] Taxation of a Lump Sum Distribution of a Portion of Total Benefits
- ———-[h] Distribution of Employer Securities
- —————[i] Distribution of Employer Securities Containing Net Unrealized Appreciation
- —————[ii] Distributions from Stock Bonus Plans and ESOPs
- ———-[i] When Payments Begin Under Employer Retirement Plans
- —————[i] When Qualified Plans Must Begin Payments
- —————[ii] When Payments May Begin Under Section 401(k) and 403(b) Plans
- —————[iii] When Payments May Commence Under Employer Pension Plans
- —————[iv] When Payments May Commence Under Eligible State/Local Government Plans
- —————[v] Earliest Date Retirement Payments May Begin Without Penalty
- —————[vi] Latest Date Retirement Payments Begin Under Tax-Favored Employer Plans
- ———-[j] Payment Elections Under Eligible Exempt Organization Plans
- ———-[k] Planning Payments Under Unfunded Nonqualified Plans
- —————[i] Elections Changing the Time and Form of Payment of Deferred Compensation
- —————[ii] Special Treatment for Plans of States and Tax-Exempt Organizations
- —————[iii] Short-Term Deferrals Not Subject to Usual Rules for Deferred Compensation
- ———-[l] Lump Sum Payment Election by Government Employees Under FERS and CSRS
- ———-[m] Lump Sum Election by Members of the U.S. Military Under the BRS
- ———-[n] Qualified Retirement Plan Annuity Earned Substantially Outside U.S
- ———-[o] U.S. Government Benefits Payable to Foreign Persons
- —–[3] Transfers from Employer Retirement Plans to IRAs
- ———-[a] Transfers from Employer Retirement Plans to IRAs Generally
- ———-[b] Employer Plans Qualifying for Tax-Free Transfers to IRAs
- ———-[c] Tax-Free Trustee-to-Trustee Transfers from a Plan to an IRA
- ———-[d] Tax-Free Indirect Rollovers from a Plan to an IRA
- ———-[e] Retention or Transfer of Investment in the Plan
- ———-[f] Retention or Transfer of Employer Securities
- ———-[g] Timing of Transfers from a Qualified Plan to an IRA
- ———-[h] Transfers from Retirement Plans to IRAs by Surviving Spouse
- —–[4] Rollovers from One Retirement Plan to Another Retirement Plan
- —–[5] IRA Rollovers to Qualified Retirement Plans
- —–[6] Avoiding the Penalty on Certain Early Distributions
- ———-[a] The Penalty Tax and Exceptions
- ———-[b] Avoiding the Penalty Using Substantially Equal Periodic Payments
- —————[i] The Substantially Equal Payment Exception Generally
- —————[ii] Substantially Equal Exception Safe Harbors
- —————[iii] Tailoring the Source and Amount of Substantially Equal Payments
- ———-[c] Avoiding the Penalty by Purchasing a Single-Premium Immediate Annuity
- ———-[d] IRA Funds Transferred to an Employer Plan to Avoid the Penalty
- ———-[e] Roth IRA Conversion While Receiving Substantially Equal Periodic Payments
- ———-[f] Retention or Transfer of Investment in the Plan
- ———-[g] Young Surviving Spouse
- ———-[h] Form 5329 and the Statute of Limitations
- ———-[i] Early Retirement of a Police Officer, Firefighter, or Emergency Medical Worker
- —–[7] Employee Stock Options and Other Stock Rights
- ———-[a] Dealing with Statutory Employee Stock Options and Stock Received
- —————[i] Favorable Tax Treatment of Statutory Employee Stock Options
- —————[ii] Meeting Statutory Stock Option Conditions
- —————[iii] Favorable Treatment of Statutory Stock Options After Retiree’s Death
- —————[iv] Paying the ISO Exercise Price with Previously-Acquired Employer Stock
- —————[v] Unfavorable Alternative Minimum Tax (AMT) Treatment of ISOs
- —————[vi] Elimination of Payroll Taxes on ISO Cancellations from M&A Transactions
- ———-[b] Dealing with Nonstatutory Stock Options and Stock Received
- —————[i] Tax Treatment of Nonstatutory Stock Options
- —————[ii] Paying the Option Price with Previously-Acquired Employer Stock
- —————[iii] Treatment of Forfeitures of Nonstatutory Stock
- —————[iv] Gifts of Unvested Nonstatutory Stock
- —————[v] Transfers of Nonstatutory Options or Stock Incident to Divorce
- —————[vi] Death of Retiree Before Vesting of Nonstatutory Stock
- ———-[c] Dealing with Employee Stock Rights
- ———-[d] Qualified Equity Grants
- —–[8] Golden Parachute Payments
- —–[9] Qualified Small Business Stock (QSB Stock)
- —–[10] Retirement of Partners and Sole Proprietors
- ———-[a] Partners and Proprietors as “Self-Employed Individuals” Under Retirement Plans
- ———-[b] Special Section 736 Provisions for Retiring Partners
- —–[11] Tax Treatment of Same-Sex Marriages
- § 1.02 Tax Planning During Retirement Years
- —–[1] Funds in Tax-Favored Plans Contributed to Roth IRAs or Roth Accounts
- ———-[a] Taxable Qualified Rollover Contributions (Roth Conversions)
- ———-[b] Long-term Tax Savings Due to Tax Rate Differential
- ———-[c] Long-term Tax Savings Due to Transfer of High Income Assets
- ———-[d] Transfers to Roth IRAs When Funds Not Needed in Retirement
- ———-[e] Retention of Funds in Both Traditional IRAs and Roth IRAs
- ———-[f] Potential Collateral Benefits of Roth Conversions
- ———-[g] Limitations on Roth Conversions
- ———-[h] Trustee-to-Trustee Roth Conversions
- ———-[i] Indirect Roth Conversions from a Tax-Favored Plan to a Roth IRA
- ———-[j] Choice of Qualified Plan or IRA for Making a Roth Conversion
- —————[i] Different Roth Conversion Tax Computations for IRAs and Qualified Plans
- —————[ii] Varying the Source and Timing of Roth Conversions
- —————[iii] Multiple Rollovers from a Single Distribution by a Qualified Plan
- ———-[k] Roth Conversion While Receiving Substantially Equal Periodic Payments
- ———-[l] Recharacterizations of Roth Conversions Made Before the Year 2018
- —————[i] Desirability, Qualification, and Effect of a Recharacterization
- —————[ii] Limited Time for Completion of a Recharacterization
- ———-[m] Roth Conversions by Surviving Spouses
- ———-[n] Arrangements That May Shift Value to a Roth IRA from Related Entities
- ———-[o] Roth Conversions to Designated Roth accounts
- —————[i] Roth Conversions to Designated Roth Accounts Generally
- —————[ii] Multiple Rollovers that Include a Roth Conversion to a Roth Account
- —–[2] Nontaxable Rollovers from Designated Roth Accounts
- ———-[a] Designated Roth Accounts Within Cash or Deferred Arrangements
- ———-[b] Rollovers from Designated Roth Accounts to Other Roth Accounts
- ———-[c] Rollovers from Designated Roth Accounts to Roth IRAs
- ———-[d] Choice of Rollover to another Designated Roth Account or to a Roth IRA
- ———-[e] Multiple Rollovers from a Single Designated Roth Account Distribution
- —–[3] Planning for Required Minimum Distributions
- ———-[a] Required Minimum Distribution Rules Generally
- ———-[b] Choice of Annuity or Non-Annuity Minimum Distributions
- ———-[c] Planning Non-Annuity Distributions for the First Minimum Distribution Year
- ———-[d] Planning Non-Annuity Distributions for Married Individuals
- ———-[e] IRAs and Plans Making both Annuity and Non-Annuity Minimum Distributions
- ———-[f] Form 5329 and the Statute of Limitations
- —–[4] Tax Planning for Required Spousal Annuities
- ———-[a] Two Types of Spousal Annuities: QJSAs and QPSAs
- ———-[b] Tax Deferral for Participants
- ———-[c] Tax Deferral for Surviving Spouses
- ———-[d] Dealing with Refusal to Consent
- ———-[e] Marriage and Divorce Planning
- —–[5] Temporary Personal Use of Rolled-Over Funds
- —–[6] Planning for Qualified Loans
- ———-[a] Qualified Plan Loans in General
- ———-[b] Refinancing to Cure a Default on a Five-Year Qualified Plan Loan
- ———-[c] Rollovers of Plan Offsets for Qualified Loans
- —–[7] The Nontaxable Portion of Social Security Benefits
- ———-[a] Lowering Taxes on Social Security Benefits Generally
- ———-[b] Lump Sum Payment of Prior Year Social Security Benefits
- —–[8] The Nontaxable Portion of U.S. Military Disability Pay
- —–[9] Plan Insurance Premium Payments for Retired Police, Firefighters, etc.
- —-[10] Chronic Illness Costs and Insurance
- ———-[a] Deductions for Long-Term Care Services
- ———-[b] Long-Term Care Insurance
- ———-[c] Fees Paid to Continuing Care Retirement Communities
- —-[11] IRA Distributions Paid Directly to Charities
- —-[12] Payments for Long-Term Disability
- ———-[a] Sourced Disability Payments
- —————[i] Taxable in Proportion to Employer Contributions
- —————[ii] Conversions to Retirement Benefits
- —————[iii] Corrections of Employer Errors or Methodology
- ———-[b] Wholly Exempt Disability Benefits
- —————[i] Types of Exempt Disability Benefits
- —————[ii] Workers’ Compensation
- —————[iii] Tort Judgments or Settlements for Disability
- —————[iv] Structured Settlements
- —————[v] Interest, Medical Expenses, and Attorneys Fees
- —————[vi] Power of Attorney Effective Upon Disability
- —-[13] Reverse Mortgages: Drawing Retirement Funds from Home Equity
- —-[14] Tax Treatment of the Sale of a Retiree’s Residence
- —-[15] Minimizing the Medicare Tax on Net Investment Incomee
- —-[16] Tax-Free Restorative Payments
- —-[17] IRA Contributions by Retirees Working Part-Time
- § 1.03 Beneficiary Tax Planning
- —–[1] Beneficiary Tax Deferral Planning Generally
- —–[2] Tax Deferral Planning for Surviving Spouse Who Is Sole Beneficiary
- ———-[a] Spousal Election to Own IRA or Roth IRA
- —————[i] Spousal Ownership of IRAs and Roth IRAs Generally
- —————[ii] IRA or Roth IRA Ownership Election for Young Surviving Spouse?
- —————[iii] Alternative Where IRA Ownership Election Not Available
- —————[iv] Interest of Surviving Spouse in a Qualified Retirement Plan
- ——————–[A] Tax-Free Rollovers to Spouses’ IRAs or Roth IRAs
- ——————–[B] Tax-Free Rollovers to Spouses’ Retirement Plans
- ——————–[C] Roth Conversions to Spouses’ Roth IRAs or Roth Accounts
- ———-[b] Surviving Spouses’ Designation as Owner or Beneficiary after Rollover
- ———-[c] Community Property Interests; Spouses and Registered Domestic Partners
- —–[3] Tax Planning if Spouse Is Not a Beneficiary or Is Not the Sole Beneficiary
- ———-[a] Alternative Rules When Surviving Spouse Not Sole Beneficiary
- ———-[b] Distributions to Nondesignated Beneficiaries (NDBs)
- —————[i] Distributions to an NDB if Retiree Dies after Required Beginning Date (RBD)
- —————[ii] Distributions to an NDB if Retiree Dies before Required Beginning Date
- ———-[c] Distributions to Ineligible Designated Beneficiaries (IDBs)
- ———-[d] Distributions to Eligible Designated Beneficiaries (EDBs)
- —————[i] Distributions When Some or All of the Beneficiaries of a Plan Are EDBs
- —————[ii] Death of Designated Beneficiary or EDB
- ———-[e] Transition Rules for Beneficiary Distributions Under the Secure Act of 2019
- —–[4] Surviving Spouse Who Dies before Minimum Distributions Required
- —–[5] Advantages of Establishing Separate Accounts for Beneficiaries
- —–[6] Advantages of a Trust as the Beneficiary of a Tax-favored Plan
- ———-[a] Choosing a Trust as Beneficiary of a Tax-favored Plan
- ———-[b] Designated Beneficiary Exception for Certain Trusts
- ———-[c] Use of Conduit Trusts
- ———-[d] Use of Accumulation Trusts with Identifiable Beneficiaries
- ———-[e] Use of Powers of Appointment
- ———-[f] Trust with Non-Individual Beneficiary
- ———-[g] Separate Accounts, Separate Trusts, and Subtrusts
- ———-[h] Planning with Trust Tax Accounting Rules
- —————[i] Special Allocations of Different Classes of Income to Different Beneficiaries
- —————[ii] Special Allocations of Trust Expenses to Classes of Income
- —————[iii] Separate and Independent Beneficiary Shares in a Trust
- —————[iv] Trust Transfers of Beneficial Interests in IRAs and Other Retirement Plans
- —————[v] Charitable Contributions Paid by a Trust
- ———-[i] Trusteed IRA as Alternative to Naming Trust as Beneficiary
- ———-[j] Placing Benefits Left to Surviving Spouse in Trust
- —–[7] Use of Disclaimers in Post-Mortem Tax Planning
- —–[8] Designation of Charity as a Beneficiary
- —–[9] Advantages of Personally Purchasing an Annuity
- —–[10] Beneficiary Elections for Unfunded Nonqualified Plans
- —-[11] Rollover of Military Death Gratuities and Life Insurance Proceeds
- —-[12] National Guardsmen or Reservists Dying or Injured on Active Duty
- —-[13] Planning to Reduce Federal Estate Taxes on Retirement Benefits
- ———-[a] Federal Estate Taxes Generally
- ———-[b] Use of the Marital Deduction for Retirement Benefits
- ———-[c] Use of the Charitable Deduction for Retirement Benefits
- ———-[d] Effective Use of the Applicable Exclusion
- —————[i] Portability of the Applicable Exclusion
- —————[ii] Traditional Planning May Still Be Useful
- —————[iii] By-Pass Trust as Beneficiary of a Tax-Favored Retirement Plan
- ———-[e] Effective Estate Planning
» Chapter 2 – QUALIFIED RETIREMENT PLANS