CHANGES TO INHERITANCE LAWS OFFER RESPITE
CHANGES TO INHERITANCE LAWS OFFER RESPITE
By Lauren Foster
Copyright The Financial Times Limited 2007
Published: January 16 2007 02:00 | Last updated: January 16 2007 02:00
Starting this year, non-spouse beneficiaries - including domestic partners - who inherit assets from employer-sponsored retirement plans such as 401(k)s may directly roll them over to inherited IRAs. Previously the rollover opportunity was available only to spouses
The provision, part of the Pension Protection Act that was signed into law in August, was not drafted to address the issues of unmarried partners but will allow unwed couples to approximate some of the protections of marriage.
The Human Rights Campaign notes that in the past, surviving same-sex partners and other non-spouse beneficiaries were typically forced to withdraw the entire amount as a lump sum and incur immediate tax charges. Doing so often bumped the survivor into a higher tax bracket because the withdrawal was counted as taxable income to the beneficiary.
Janine Racanelli, head of JPMorgan Private Bank's Advice Lab, says there are stringent requirements to be met when taking advantage of this new provision, including:
*The assets must be transferred from one trustee to another trustee and the beneficiary cannot receive a cheque as part of the rollover process.*The assets must be transferred into a separate IRA and cannot be mixed with other assets, such as another IRA.
*The new account that receives the assets must reference the name of the decedent who bequeathed them.
*The beneficiary can spread the distribution out only one of two ways: either over a five-year period or over their life expectancy.
By Lauren Foster
Copyright The Financial Times Limited 2007
Published: January 16 2007 02:00 | Last updated: January 16 2007 02:00
Starting this year, non-spouse beneficiaries - including domestic partners - who inherit assets from employer-sponsored retirement plans such as 401(k)s may directly roll them over to inherited IRAs. Previously the rollover opportunity was available only to spouses
The provision, part of the Pension Protection Act that was signed into law in August, was not drafted to address the issues of unmarried partners but will allow unwed couples to approximate some of the protections of marriage.
The Human Rights Campaign notes that in the past, surviving same-sex partners and other non-spouse beneficiaries were typically forced to withdraw the entire amount as a lump sum and incur immediate tax charges. Doing so often bumped the survivor into a higher tax bracket because the withdrawal was counted as taxable income to the beneficiary.
Janine Racanelli, head of JPMorgan Private Bank's Advice Lab, says there are stringent requirements to be met when taking advantage of this new provision, including:
*The assets must be transferred from one trustee to another trustee and the beneficiary cannot receive a cheque as part of the rollover process.*The assets must be transferred into a separate IRA and cannot be mixed with other assets, such as another IRA.
*The new account that receives the assets must reference the name of the decedent who bequeathed them.
*The beneficiary can spread the distribution out only one of two ways: either over a five-year period or over their life expectancy.
posted by Carlos T Mock at 7:07 AM
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