Message Font: Serif | Sans-Serif
No. of Recommendations: 0
I spoke with Fidelity today about my 401K and the pro-rata rule and, again, they verified you all were right on the money when you said if I rolled my 401K into an IRA I couldn't do the back-door ROTH conversions anymore. Since I already did one for this year, I can’t roll until next year at the earliest without messing that all up.

The guy on the phone brought up another interesting point. He said on most 401Ks or IRAs there is a 5-year rule if the owner of such dies – in that the beneficiary of said IRA/401K has five years in which to move the entire thing into an “Inherited IRA” or they’ll be forced to distribute the entire thing (kicking off a load of taxes) and send the proceeds to the beneficiary.

He also said there are issues now if you have a Living Trust and your Trust inherits your IRA rather than a human being. Taxes are much higher and there are other issues. He told me to google Look Through or See Through Trust along with 401K. I think our IRA’s currently go to spouse and then trust. If we died at the same time, it would be a big issue as we have a lot in 401K’s.

New topics. Discuss amongst yourselves... :)

Cross posting to Estate Planning board...
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.