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Author: StockGoddess Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121339  
Subject: Leaving your 401K to a trust & 5 year rule Date: 4/29/2014 1:10 PM
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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...
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