Life and Death Planning for Retirement Benefits

Table of Contents

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Restoring lawsuit winnings to IRA.....................................................................................412 Paying, deducting, IRA investment expenses ....................................................................412 IRAs owning “nontraditional” investments........................................................................413 A. Partnerships ..............................................................................................................414 B. Hedge funds and other “private” investments .......................................................415 C. S corporation stock ..................................................................................................415 D. Real estate ................................................................................................................416 E. Active business ........................................................................................................416 IRAs and prohibited transactions ........................................................................................416 8.2 IRA S AND THE T AX ON UBTI..................................................................................................419 UBTI: Rationale, exemptions, returns, double tax, etc. .....................................................419 Income from an IRA-operated trade or business ...............................................................419 When investment income becomes UBTI ..........................................................................420 Income from debt-financed property ..................................................................................420 8.3 T YPES OF R ETIREMENT P LANS ................................................................................................421 Overview of types of plans ..................................................................................................421 401(k) plan; elective deferral; CODA.................................................................................422 403(b) plan............................................................................................................................422 Deemed IRA, deemed Roth IRA. See ¶ 5.2.01...............................................................................422 Defined Benefit plan ............................................................................................................422 Defined Contribution plan ...................................................................................................424 Designated Roth account (DRAC). See ¶ 5.7. ................................................................................425 ESOP (Employee Stock Ownership Plan) ..........................................................................425 Individual Account Plan. Defined Contribution Plan. ¶ 8.3.05.........................................425 Individual Retirement Account (IRA); stretch IRA...........................................................425 Keogh plan............................................................................................................................425 Money purchase plan. See ¶ 8.3.10. ................................................................................................426 Pension plan..........................................................................................................................426 Profit-sharing plan................................................................................................................427 Qualified Retirement Plan ...................................................................................................427 Roth IRA. See ¶ 5.2.01.....................................................................................................................428 SEP-IRA, SIMPLE ..............................................................................................................428 Traditional IRA. See ¶ 8.3.08. .........................................................................................................428 Trusteed IRA. See ¶ 8.3.08, ¶ 6.1.07. ..............................................................................................428 9.1 10% P ENALTY ON E ARLY D ISTRIBUTIONS ..............................................................................429 What practitioners must know.............................................................................................429 The § 72(t) penalty on early distributions...........................................................................429 How the penalty applies to particular distributions............................................................429 Enforcement of early distributions penalty ........................................................................430 9.2 E XCEPTION : “S ERIES OF E QUAL P AYMENTS ”..........................................................................431 Series of substantially equal periodic payments (SOSEPP) ..............................................431 CHAPTER 9: DISTRIBUTIONS BEFORE AGE 59 ½...............................................................429