CEA Retirement Planning & IRA Estate Strategies 3

Question 1

Under ERISA, qualified retirement plan assets (such as 401(k) accounts) are generally protected from which of the following?

Accepted Answer

Creditor claims and bankruptcy proceedings

Answer

Federal income taxes on distributions

Answer

Estate taxes upon the account holder's death

Answer

Required minimum distribution rules

Question 2

What is the annual Roth IRA contribution limit for 2024 for individuals under age 50 (subject to income limits)?

Accepted Answer

$7,000

Answer

$5,500

Answer

$6,000

Answer

$6,500

Question 3

A client converts $200,000 from a traditional IRA to a Roth IRA. What is the immediate federal income tax consequence?

Accepted Answer

The $200,000 is added to ordinary taxable income in the year of conversion

Answer

No tax is owed if the converted funds remain in the Roth IRA for at least 60 days

Answer

Only 50% of the converted amount is taxable under the capital gains exclusion

Answer

A flat 20% tax applies to all Roth conversions regardless of income bracket

Question 4

What does the IRS 'pro-rata rule' require when an individual converts funds from a traditional IRA to a Roth IRA?

Accepted Answer

The taxable portion of the conversion is determined proportionally across all traditional IRA balances, including non-deductible contributions

Answer

Conversions must be limited to a fixed percentage of earned income each year

Answer

RMDs must be calculated proportionally across all retirement accounts before a conversion

Answer

The converted amount cannot exceed the current year's RMD amount

Question 5

What is a 'backdoor Roth IRA' contribution strategy used by high-income earners?

Accepted Answer

Making a non-deductible traditional IRA contribution and then converting it to a Roth IRA

Answer

Rolling a 401(k) directly into a Roth IRA without paying income taxes

Answer

Contributing to a Roth 401(k) through an employer to sidestep Roth IRA income limits

Answer

Converting only the after-tax portion of a SEP IRA directly to a Roth IRA

Question 6

For minor children who inherit an IRA as Eligible Designated Beneficiaries (EDBs), when does the 10-year rule begin to apply?

Accepted Answer

When the child reaches the age of majority under applicable state law (generally age 21 per IRS)

Answer

Immediately upon inheriting the IRA at any age

Answer

When the child reaches age 18

Answer

When the child reaches age 30

Question 7

What is the primary distinction between a SEP IRA and a traditional IRA that makes a SEP IRA particularly significant in estate planning for self-employed individuals?

Accepted Answer

SEP IRAs allow substantially higher annual contribution limits—up to 25% of compensation or $69,000 (2024)—creating a much larger wealth transfer vehicle

Answer

SEP IRAs are exempt from estate taxes while traditional IRAs are fully included in the gross estate

Answer

SEP IRA distributions pass to heirs completely income-tax-free unlike traditional IRA distributions

Answer

SEP IRAs are entirely exempt from the 10-year distribution rule for inherited accounts