The Book “Top 10 IRA Mistakes” Chapter 3 – Stay Tuned for Chapter 4

Mistake #3  Not Properly Designating Beneficiaries

New Book - David F Royer - Top 10 IRA Mistakes and How To Avoid IRS Tax Traps

The beneficiary form is the single most important document in the estate plan. A common mistake made by retirement plan owners is in the area of beneficiary designations. You would think that choosing who will inherit the money left in your IRA or 401(k) would be simple. The reality is that many children and grandchildren who inherit a qualified plan will be forced into rapid distribution causing rapid taxation due to beneficiary mistakes. Only the IRA owner or inheriting spouse can designate beneficiaries for the purpose of stretching out the distributions and spreading the taxes over the beneficiary’s life expectancy. Here are a few common beneficiary mistakes.

Too Much, Too Fast 

Younger or less experienced beneficiaries sometimes inherit too much, too fast. In such cases, the inherited money can do more harm than good! If the beneficiary has limited experience handling money or has a spendthrift problem, they can squander the funds that were intended to support them throughout their lifetime.

Those who save money are usually better equipped to handle money than those who inherit money.

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This book will help your prospects understand why getting a Second Opinion from you, can save them Thousands in IRS Penalties, Prevent Rapid Taxation, and reduce Excessive Fees and Loads.

The Retirement Plan Owner’s Essential Guide to Navigate the Minefield of IRS Regulations

  • Avoid the 80% IRS TAX TRAP
  • Avoid Costly IRS Penalties
  • Why most Beneficiary Documents Don’t Work
  • Increase your IRA Income
  • Convert your IRA into Tax Free Income
  • Reduce your IRA Taxes
  • Take Control of your 401(k) and 403(b) Plans
  • Don’t let Fees and Loads Erode your Savings

New Rules Coming for Brokers Who Give Retirement Advice – Obama Endorses

David F. Royer

High Everyone,

Please read the 2 short articles below. In a nutshell; Brokers who work for Broker Dealers may soon face the same fiduciary responsibility as Registered Investment Advisors. This action, when it becomes law, will likely increase the already growing migration from the Broker Dealer world to the Registered Investment Advisory world, which is already held to the higher fiduciary standard. If you are offering advice about IRAs, 401k, and other retirement plans; get ready for a major shift in the landscape.

 

Currently Broker Dealers are responsible to ensure that their Brokers make suitable recommendations. This does NOT mean that their recommendations are always in their client’s best interest and often what is the best for the client takes a back seat to what is best for the Broker or Broker Dealer. This is where the abuses can be found and this is what the new rules promise to correct. We shall see.

On the flip side Registered Investment Advisors are obligated, by oath, to always act in their client’s best interest – now and in the future. This greater level of Fiduciary Responsibility translates to clients receiving superior advice.

 

I believe a similar level of responsibility may be mandated for those who sell annuities and other retirement related insurance products. I also believe this change will arrive in the insurance industry sooner than most will be prepared for.

 

Conclusion:

  • If you have a Series 6 or 7 and you are currently associated with a Broker Dealer, you may want to consider migrating to an RIA platform to better serve your clients and generate a stable residual income for your practice.

 

  • If you have  an insurance license only, you should add managed money to your practice “as fast as you can” by associating with an RIA platform that understands the value of Safe Money Alternatives as well as Managed Money.  Doing so will increase your value proposition to your clients and generate additional and substantial residual income for you and your family.

 

  • Secure a relationship with an exceptional RIA platform that understands the need for both annuities and securities in a well balanced portfolio. Look for a Registered Investment Advisory Firm that is prepared to help you pass your Series 65 and give you the one-on-one training it will take for you to become the holistic advisor your clients deserve.

 

Below are the links to the articles:

 

New rules coming for broker retirement advice

The Labor Department is readying new proposed rules on retirement investment advice, and the battle lines are being drawn.

Read more: http://www.cnbc.com/id/102440477

Sent from the CNBC

 

Obama tells DOL to move forward with fiduciary redraft

Provided by LifeHealthPRO

 

Keys to the IRA Kingdom® – Advisor’s IRA Distribution Training Course

 

(Click to Order Book)

New Book - David F Royer - Top 10 IRA Mistakes and How To Avoid IRS Tax Traps

The Book “Top 10 IRA Mistakes” Chapter 2 – Stay Tuned for Chapter 3

Mistake #2 – Not Taking Advantage of the “Stretch Option”

If there is money left in your IRA, who do you want to leave it to and how much do you want to leave to the IRS? In 2001, the IRS proposed sweeping changes that would create a magnificent financial planning opportunity for owners of IRAs and other qualified retirement plans. These changes went into effect in 2002 and dramatically simplified the complex IRA distribution rules. The new rules were designed, in part, to help prevent owners of retirement plans from outliving their retirement savings, but they did much more. These new rules also created an income planning opportunity that would allow the taxes on IRA distributions to be spread over three generations. Prior to the new rules, the methods of calculating the Required Minimum Distributions that must begin after age 701⁄2 were complicated. Choosing the wrong method could result in rapid distribution, causing rapid taxation. Even worse, children and grandchildren who might inherit these accounts were forced to pay all of the IRA taxes in one to five years. For many IRA owners and their families, retirement planning became a TAX nightmare. Beginning in 2002, three major changes created the “Stretch Option”

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The Book That Converts Prospects Into Clients!

For More Information Go To:  Top 10 IRA Mistakes and How To Avoid IRS Tax Traps

New Book - David F Royer - Top 10 IRA Mistakes and How To Avoid IRS Tax Traps

This book will help your prospects understand why getting a Second Opinion from You, can save them Thousands in IRS Penalties, Prevent Rapid Taxation, and Reduce Excessive Fees and Loads.

The Retirement Plan Owner’s Essential Guide to Navigate the Minefield of IRS Regulations

  • Avoid the 80% IRS TAX TRAP
  • Avoid Costly IRS Penalties
  • Why most Beneficiary Documents Don’t Work
  • Increase your IRA Income
  • Convert your IRA into Tax Free Income
  • Reduce your IRA Taxes
  • Take Control of your 401(k) and 403(b) Plans
  • Don’t let Fees and Loads Erode your Savings
  • Learn why a Second Opinion can Save You Thousands
  • Avoid the Top 10 IRA Mistakes

The Book “Top 10 IRA Mistakes” Chapter 1 – Stay Tuned for Chapter 2

#1 of the Top 10 IRA Mistakes

Mistake #1 – Missing a Required Minimum Distribution

This is the #1 and most costly mistake made by IRA owners and their beneficiaries. The first taxable Required Minimum Distribution (RMD) must be taken by April 1 of the year after the IRA owner turns age 70 1/2. This is called the Required Beginning Date (RBD). Future required distributions are based on the account value as of December 31 of the prior year and must be taken by December 31 of the current year. This is how the IRS dictates when the IRA taxes must be paid. Extreme penalties are charged if the IRA owner fails to take the full RMD by the deadline. In addition to paying income tax, the owner will also owe an Excise Tax equal to 50% of the missed distribution! This could create a tax burden of more than 80% on missed Required Minimum Distributions. [Read More…]


The Book That Converts Prospects Into Clients!

For More Information Go To:  Top 10 IRA Mistakes and How To Avoid IRS Tax Traps

New Book - David F Royer - Top 10 IRA Mistakes and How To Avoid IRS Tax Traps

This book will help your prospects understand why getting a Second Opinion from You, can save them Thousands in IRS Penalties, Prevent Rapid Taxation, and Reduce Excessive Fees and Loads.

The Retirement Plan Owner’s Essential Guide to Navigate the Minefield of IRS Regulations

  • Avoid the 80% IRS TAX TRAP
  • Avoid Costly IRS Penalties
  • Why most Beneficiary Documents Don’t Work
  • Increase your IRA Income
  • Convert your IRA into Tax Free Income
  • Reduce your IRA Taxes
  • Take Control of your 401(k) and 403(b) Plans
  • Don’t let Fees and Loads Erode your Savings
  • Learn why a Second Opinion can Save You Thousands
  • Avoid the Top 10 IRA Mistakes

Change in IRA Rollover Rules

Please see below.  The Tax Court ruled that the current IRA rollover rules allowing one rollover per IRA per year is no longer valid. The one rollover per year now applies to all IRAs.

Example:

If an owner has 2 IRAs and does a rollover with one IRA and later decides to do a rollover of the second IRA within the same one year period, the second rollover will be a taxable event.

Until we get further guidance from the IRS, I recommend using ONLY Trustee-to-Trustee transfers when moving qualified accounts.

Court says one-rollover-per-year rule applies to all your IRAs

By Bill Bischoff

The United States Tax Court recently ruled that you can only do one tax-free IRA rollover a year (365 day period) even if you have several IRAs. The new decision flies in the face of long-standing IRS guidance that says the one-IRA-rollover-per-year limitation simply means you can’t use the same IRA for more than one rollover in any one-year period. Here’s what you need to know, including how to avoid the whole issue, along with the necessary background information.

IRA rollover basics

According to the tax law, the general rule is that an amount received as an IRA distribution must be included in your gross income for federal income tax purposes (except to the extent the distribution consists of non-deductible contributions).

A favorable exception to the general rule applies when you put the distributed amount back into the same IRA or a different IRA by no later than the 60th day after the day on which you received the distribution. In that case, you’ve accomplished a tax-free IRA rollover. To beat the 60-day deadline, start counting on the day after you receive the IRA distribution, and get the rollover done by 60th day (you don’t get any extra slack if the end of the 60-day period falls on a weekend or holiday).

By law, the tax-free rollover privilege is limited to one rollover within any one-year (365-day) period. The one-year period starts on the date the amount that is rolled over is received.

The IRS has historically taken the position, in Publication 590, that when an individual has several IRAs, the one-IRA-rollover-per-year limitation applies separately to each IRA. In other words, you cannot do more than one tax-free rollover during any 12-month period with any particular IRA, but if you have two or more IRAs, you could potentially make two or more tax-free rollovers during a 12-month period (one for each account). Now the Tax Court has said this taxpayer-friendly interpretation is wrong.

Tax court decision conflicts with long-standing IRS guidance

Tax Court’s decision directly conflicts with what IRS Publication 590 (Individual Retirement Arrangements) has said on the subject for many years. Specifically, Publication 590 says: “Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover.”

Example 1 below is taken almost verbatim from the current version of Publication 590.

Example 1: You have two traditional IRAs: IRA-1 and IRA-2. You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). You cannot, within 1 year of the distribution from IRA-1, make a tax-free rollover of any distribution from either IRA-1 or IRA-3 into another traditional IRA. However, the rollover from IRA-1 into IRA-3 does not prevent you from making a tax-free rollover from IRA-2 into another IRA (other than IRA-1 or IRA-3). This is because you have not, within the last year, rolled over tax-free any distribution from IRA-2 or made a tax-free rollover into IRA-2.

However, the new Tax Court decision says you cannot involve IRA-2 in a tax-free rollover within the one-year period that begins on the date you received the distribution from IRA-1.

Example 2: Say you desperately need some cash, but only for a short time. The only viable solution is to access funds held in your two IRAs (IRA-1 and IRA-2). So you take $50,000 out of IRA-1 and return the money to the same account within 60 days. A few days later, you take another $50,000 out of IRA-2 and return the money to the same account within 60 days. According to the guidance in Publication 590, these transactions comprise two tax-free IRA rollovers. But according to the new Tax Court decision, one of the $50,000 distributions is fully taxable, because you can only do one tax-free IRA rollover in any one-year period. Not good!

Avoiding the issue

Thankfully, you can dodge the whole one-IRA-rollover-per-year issue by moving your IRA money around tax-free via direct trustee-to-trustee transfers that don’t ever pass through your hands. Such direct transfers don’t count as rollovers for purposes of the one-IRA-rollover-per-year limitation. For example, say you have three adult children and want to split up one big IRA (IRA-1) into three new IRAs (IRA-2, IRA-3, and IRA-4), with one child named as the beneficiary of each new account. You can liquidate IRA-1 by moving the money in that account into the three new IRAs via direct trustee-to-trustee transfers. Even though you’ve effectively made three tax-free rollovers to fund the new IRAs, the direct transfers don’t count as rollovers for purposes of the one-IRA-rollover-per-year rule. Problem solved! Source: IRS Revenue Ruling 78-406.

Another beneficial rule says that rolling over a distribution from a qualified retirement plan, such as a 401(k) plan, into your IRA doesn’t count as a rollover for purposes of the one—IRA-rollover-per-year limitation. Good! Source: Treasury Regulation 1.402(c)-2, Q&A-16.

Bottom Line: You can make as many of these types of transactions as you want within a one-year period without running afoul of the one-IRA-rollover-per-year rule.

The last word

Thanks to the Tax Court, folks with multiple IRAs must now be extremely careful to live within the one-IRA-rollover-per-year limitation when moving around their IRA money. That said, making direct trustee-to-trustee transfers between IRAs will not cause you to run afoul of the limitation. So go that route whenever possible, and consider getting your tax pro involved whenever you are considering making significant IRA transactions. Better to be safe than sorry.

Learn more or register now for the Keys to the IRA Kingdom Online Advisor Training Course

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