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Author: DBuerkle Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121338  
Subject: IRA Beneficiary is an LLC Date: 6/14/2006 4:30 PM
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My father, in his strange way of doing things, selected the family LLC as the beneficiary of his IRA after my mother died. He was the controlling partner and his 8 children represent equal partners of the LLC. He passed away in January and now we fear that Uncle Sam will benefit much more than we will. My questions are:
1. Is an LLC a valid beneficiary for an IRA?
2. Can the LLC designate the partners individually as alternate beneficiaries since an LLC does not have a life expectancy?
3. Will the LLC partners have to take a lump distribution and pay income taxes now as our only alternative?
4. Would the IRA have been free and clear of the estate had he named individuals as beneficiaries, i.e., not subject to estate taxes?

Help! This is a mess!
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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87390 of 121338
Subject: Re: IRA Beneficiary is an LLC Date: 6/14/2006 4:42 PM
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I posted a reply in the "Inheritance Strategies" board; is it correct?

http://boards.fool.com/Message.asp?mid=24228622

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87391 of 121338
Subject: Re: IRA Beneficiary is an LLC Date: 6/14/2006 4:49 PM
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1. Is an LLC a valid beneficiary for an IRA?

Yes.

2. Can the LLC designate the partners individually as alternate beneficiaries since an LLC does not have a life expectancy?

No. The LLC is now the recipient of the funds. It will need to pay those out according to the terms of the LLC, not the IRA.

3. Will the LLC partners have to take a lump distribution and pay income taxes now as our only alternative?

That depends on how the LLC is being taxed. An LLC must be taxed either as a corporation or a partnership.

4. Would the IRA have been free and clear of the estate had he named individuals as beneficiaries, i.e., not subject to estate taxes?

No. The IRA is a part of the estate no matter who the beneficiary is.

I trust that complex estate planning like this is part of a strategy put in place by a professional advisor. Now is the time to go back to the advisor and have them assist you with the implementation of the estate plan.

--Peter

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87552 of 121338
Subject: Re: IRA Beneficiary is an LLC Date: 6/24/2006 5:13 PM
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3. Will the LLC partners have to take a lump distribution and pay income taxes now as our only alternative?

That depends on how the LLC is being taxed. An LLC must be taxed either as a corporation or a partnership.

________________________________________________________________________

The way I understand Natalie Choate's book is that the LLC is not a designated bene since only individuals can be designated bene.

Therefore the funds could no be paid out ove the life expectancy method.

Am I missing something?

buzman

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87556 of 121338
Subject: Re: IRA Beneficiary is an LLC Date: 6/24/2006 11:05 PM
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The way I understand Natalie Choate's book is that the LLC is not a designated bene since only individuals can be designated bene.

I'm not sure what you're getting at here. Anyone can be a beneficiary of an IRA. I don't know of any limitations on IRA beneficiaries.

Therefore the funds could no be paid out ove the life expectancy method.

If the IRA beneficiary isn't a natural person, there are some limitations on the distribution options. And I think this is one of them. Only natural persons can elect to take the IRA distributions over the deceased owner's acturial life expectancy.

--Peter

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87564 of 121338
Subject: Re: IRA Beneficiary is an LLC Date: 6/26/2006 12:07 PM
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Only individuals can be designated beneificiaries, the LLC is not a desisgnated beneficiary and therefore has some lack of flexiblity regarding distributions.

Your advice for the OP to discuss this estate plan with whomever drew it up is a good idea.

buzman





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