Tuesday, September 28, 2010
This was a helpful that came from the FA Advisor by way of Dow Jones.
You can read the whole list yourself if you click the link below, but items 5 and 6 on the list that I thought were particularly useful:
5. Who's your beneficiary?
Here's some well-worn but can't-be-repeated-often-enough advice: Review your beneficiary designations. Make sure there is both a primary and a contingent beneficiary named on the beneficiary designation form.
"If there is no beneficiary named, the IRA proceeds will go to the estate and lose the tax advantage of the stretch," said Connor. "If there is no contingent beneficiary, and the primary beneficiary has died and no new primary beneficiary has been named, then the assets also go to the estate with the same negative result."
It's especially worth checking your beneficiary designations if you are divorced, recently or ever.
"Make sure your ex-spouse has been deleted as a beneficiary, unless you want them to remain as a beneficiary," said Connor. "The U.S. Supreme Court has recently ruled that the beneficiary named on the beneficiary designation form trumps divorce."
Connor also advised against naming a "living trust" as the beneficiary. "A living trust should not be the beneficiary because the living trust must qualify as a 'designated beneficiary' to receive favorable stretch and tax treatment," he said. "I find that most living trusts do not qualify, or lose their designated beneficiary status through later changes to the trust."
Make sure your custodian has a written copy of your beneficiary designations.
6. One last chance for Roth conversions
If you plan to do a Roth conversion in 2010, "the funds must leave the IRA by Dec. 31 to be reported and taxable as a 2010 distribution and conversion," DeVeny said. "The funds can then be rolled over to the Roth IRA up to 60 days after they are received by the account owner--up to March 1 if the distribution was received on Dec. 31."
Contrary to what some might believe, you do not have until April 15, 2011, to do a 2010 conversion, DeVeny said.
Here is another reason why you might want to convert some or all of your IRA to a Roth IRA: according to Connor, the Roth IRA could fund a credit shelter or by-pass trust.
"A Roth IRA is usually not subject to the trust tax rate," he said. Also, review your power of attorney to make sure the agent has authority to recharacterize the Roth, if needed, Connor said.
Remember, too, that anyone can convert their traditional IRAs to a Roth IRA in 2010 regardless of income. What's more, you can pay the taxes over two years, instead of one.
Ten IRA Tasks To Do Before The Year Ends