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

ERISA-qualified retirement plans provide broad creditor protection, and the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 extended similar protections to IRA accounts up to an inflation-adjusted limit.

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

The Roth IRA contribution limit for 2024 is $7,000 for individuals under age 50, with an additional $1,000 catch-up contribution allowed for those aged 50 and older.

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

The full converted amount from a traditional IRA is included in ordinary taxable income in the year of conversion because the original contributions were made on a pre-tax basis.

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

The pro-rata rule prevents selectively converting only after-tax (non-deductible) IRA dollars; instead, all traditional IRA balances are aggregated to determine the taxable ratio of any conversion.

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

The backdoor Roth strategy allows high-income earners who exceed direct Roth IRA income limits to make non-deductible traditional IRA contributions and immediately convert them to a Roth IRA, subject to the pro-rata rule.

(CEA) Certified Estate Advisor Practice Test

(CEA) Certified Estate Advisor Practice Test

CEA Retirement Planning & IRA Estate Strategies 3