CEA Retirement Planning & IRA Estate Strategies 2

Question 1

When a surviving spouse inherits a traditional IRA, which unique option is available that is NOT available to other beneficiaries?

Accepted Answer

They may roll the inherited IRA into their own IRA and treat it as their own

Answer

They may delay RMDs indefinitely regardless of age

Answer

They may convert the inherited IRA to a Roth without any income tax

Answer

They may exclude all inherited IRA distributions from taxable income

Question 2

What is the primary estate planning advantage of converting a traditional IRA to a Roth IRA?

Accepted Answer

It allows beneficiaries to receive income-tax-free distributions

Answer

It immediately removes the account balance from the taxable estate

Answer

It eliminates all estate taxes on the converted amount

Answer

It avoids the 10-year distribution rule for inherited Roth IRAs

Question 3

What is an 'accumulation trust' in the context of naming a trust as an IRA beneficiary?

Accepted Answer

A trust that can retain IRA distributions within the trust rather than passing them directly to beneficiaries

Answer

A trust that must distribute all RMDs immediately to named beneficiaries

Answer

A trust that converts traditional IRA funds to Roth IRA funds tax-free

Answer

A trust that permanently eliminates all income taxes on IRA distributions

Question 4

What is Net Unrealized Appreciation (NUA) and when is it relevant in retirement planning?

Accepted Answer

The appreciation on employer stock distributed in-kind from a qualified plan that is taxed at capital gains rates

Answer

The tax-free growth in a Roth IRA that is not subject to RMDs

Answer

The after-tax growth in a traditional IRA that avoids double taxation

Answer

The unrealized gain on estate assets that receives a step-up in basis at death

Question 5

Unlike assets that receive a step-up in basis at death, how are inherited traditional IRA distributions generally taxed to the beneficiary?

Accepted Answer

As ordinary income to the beneficiary in the year of distribution

Answer

At the long-term capital gains rate applicable to the decedent

Answer

At a flat 20% federal estate and income combined tax rate

Answer

Tax-free because the estate already paid estate taxes on the account value

Question 6

What are the requirements for a trust to qualify as a 'see-through trust' (or look-through trust) for IRA beneficiary purposes?

Accepted Answer

The trust must be valid under state law, irrevocable at death, have identifiable beneficiaries, and provide IRA documentation to the plan administrator

Answer

The trust must be revocable and the grantor must be the sole beneficiary

Answer

The trust must be a charitable remainder trust approved by the IRS

Answer

The trust must be established at least five years before the IRA owner's death

Question 7

Which retirement account type allows continued contributions and delayed RMDs past the standard RMD age if the participant is still actively employed by the plan sponsor?

Accepted Answer

401(k) through the current employer

Answer

Traditional IRA

Answer

Roth IRA

Answer

Inherited IRA