Rolling an IRA Into a Family Limited Partnership Case Study

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Taxes on Large Retirement Plan Balance: Dr. Norma

One solution is to roll the IRA into a corporate retirement plan (Josephs, 2014). This can allow Norma to purchase life insurance within the plan and at the same time be confident of being able to distribute the policy outside the plan because the policy value will eventually be lower than the price of the accumulated premiums. Of course, all of this would be dependent upon whether or not Norma could go back to work or even find a qualified retirement plan into which she could roll the IRA. At the same time, it is important to remember that the IRS does not permit cash surrender for policy valuation. This, however, is probably not the best idea because at 68 it is highly unlikely that Norma wants to roll the IRA into a new plan much less go back to work in order to do this.

A different solution would be to have the IRA assets be part of a restricted management agreement. This would allows the fund to be managed by an investment manager for a fixed amount of years, giving that manager the freedom to invest as he sees fit. The good idea behind this option is that with such leeway and freedom, the manager will deliver better returns over the long run than he would if it were a quarter to quarter arrangement.

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The manager of course would have to be able to deliver the kind of returns that would justify tying up the money for that fixed amount of time, but if he can deliver, this option could be worth it.

A third option would be to roll the IRA into a corporate retirement plan, as in the first option, but then the idea that is an alternative to the first would be to have the benefits of the new plan that includes her kids. This would of course depend on whether or not her children work in the same corporation. So there is a lot that depends on this scenario. But if they do work together, the benefits of this idea are that the plan would be annuitized so that when she died there was excess value that would go to the kids since they were part of the new plan.

A further option could be to take the IRA and invest it in a….....

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