Retirement Distribution Planning for IRAs and Qualified Retirement Plans
Retirement plans and IRAs have become significant assets in the financial picture of many individuals. With the growth of such tax-deferred assets, however, the potential income and estate tax problems associated with their accumulation and distribution have created major financial roadblocks to their owners. Retirement plans and IRAs can be subject to both estate tax and income tax. First of all, distributions from such plans can be subject to minimum distribution rules which, if violated, result in penalties in addition to income taxes. Secondly, retirement plans and IRAs are subject to estate tax. Subsequently, when benefits are withdrawn by the descendent's beneficiaries, the distributions are subject to income tax.
A major goal of planning for retirement benefits and IRA distributions is to preserve the option of continued income tax deferral for retirement plans for the longest period possible. The potential for continued income tax deferral after the death of the surviving spouse, over the multi-decade life expectancy of their children, is a valuable asset to be preserved.
We will provide you with alternatives for dealing with distributions from your retirement plan and/or IRA. Such alternatives seek to provide you with the longest possible alternative for withdrawing benefits, realizing that withdrawals can always be increased without penalty after age 59 1/2. We also consider conversion of traditional IRAs to Roth IRAs with their potentially greater after-tax wealth accumulation.
tpbs, LLP also considers the significant potential impact of estate taxes on retirement plans and IRAs. We consider the use of the unlimited marital deduction and the use of various testamentary trusts for holding IRAs. Liquidity planning for estates to reduce the need for using retirement plan or IRA benefits to pay estate taxes is also considered.