Handling Legal Issues

Transcription

1 IRA Legal Issues

2 Learning Objectives Recognize power of attorney (POA) issues Demonstrate merger and acquisition procedures Identify and resolve abandoned property issues Determine the correct process for paying IRA fees 2

3 Handling Legal Issues Do not give tax advice Refer to financial organization attorney Federal laws generally govern IRAs State laws may affect IRAs 3

4 Power of Attorney

5 Power of Attorney (POA) Must have signed agreement Authorizes one person (attorney-in-fact or agent) to act on behalf of another person (principal or grantor) The attorney-in-fact stands in the shoes of the principal 5

6 Durable POA Continues even if principle becomes legally incompetent Should contain provision that POA will remain effective upon principle s incapacity May confer broad authority to the agent Nondurable POA Terminates if principle becomes legally incompetent May confer broad authority to the agent 6

7 POA Documents Fill-in-the-Blank Statutory Short Form Attorney-Drafted 7

8 Revoking a POA Writing Act Presumption Orally 8

9 Revocation Process Attorney-in-fact Notice Financial organization 9

10 Sample POA Revocation To WHOM IT MAY CONCERN: I (the Principal ), revoke and declare null and void the POWER OF ATTORNEY I granted to, which is dated, 20. Please be advised that the above-named person no longer has power or authority to act as my attorney in-fact in any way. Date: (Principal) The foregoing instrument was acknowledged before me this day of, 20, by. (Notary Public) 10

11 Signatures In writing Principal and attorney-in-fact identified Signed and dated Documentation Retain a copy of POA Identification presented by attorney-in-fact Checking the POA Document Scope Durable or nondurable Effective date and expiration Miscellaneous State law protection for financial organization Attorney review needed 11

12 Financial Organization Responsibilities Obtain copy of written POA document Present POA document to attorney or follow POA guidelines drafted by attorney If valid, follow attorney-in-fact s instructions 12

13 POA Documents Example Julie presented a POA document for her father Julie believes she can take distributions from her father s IRA Can Julie take a distribution? What is your process for handling this POA? Answers may vary, but should include obtaining a copy of the POA, having the financial organization s attorney review the POA document or following the predetermined process, and following the attorney-in-fact's instructions if the financial organization agrees the POA is valid. 13

14 Mergers and Acquisitions

15 Mergers and Acquisitions Significant effect on IRA programs Different options available to clients Different procedures for handling transactions Need to preserve data for proper reporting 15

16 Mergers and Acquisitions 16

17 Mergers and Acquisitions 17

18 Mergers and Acquisitions 18

19 Mergers and Acquisitions 19

20 Escheat Laws

21 Escheat Laws Unclaimed or abandoned IRAs States rights 21

22 Identify Abandoned IRAs Determine relevant state law Escheat laws often applied at individual level Uniform Unclaimed Property Act Escheat periods vary 22

23 Locating Missing IRA Owners Attempt contact at last known address Report accounts presumed abandoned to state 23

24 Reporting Abandoned IRAs to the State Financial organization must file a report with the state State will publish notice in newspaper State must again mail notice to IRA owner at last known address 24

25 Paying Unclaimed IRAs to the State Pay or deliver to state within 6 months Complete and retain withdrawal statement 25

26 Reporting and Withholding Rev. Rul Report IRA owner as recipient Form 1099-R Regular IRA withholding rules apply Withholding notice Beneficiary IRAs 26

27 Escheat Laws Example Julia, age 73, had a Traditional IRA at your financial organization. On June 12, 2014, Julia passed away. Her brother, Jacob Cumming, is the beneficiary of her IRA but has not made an election to receive the IRA assets. State law allows you to escheat the assets to the state. Julia s Traditional IRA currently has a balance of $83, You must report this transaction to the IRS. Complete IRS Form 1099-R to report the transaction. 27

28 Escheat Laws Example SUNFLOWER FINANCIAL ORGANIZATION 334 MAIN STREET FARMINGDALE, NY JACOB CUMMING X X 192 CHERRY STREET FARMINGDALE, NY X 28

29 IRA Fees

30 IRA Fees Fees/expenses that can be paid out-of-pocket or out of the IRA Fees/expenses that must be paid out of the IRA 30

31 Out-of-Pocket or Out of the IRA Ordinary and necessary expenses for administration of IRA Annual fee for maintaining IRA Fees for transactions (e.g., rollovers) Investment management fees Trustee fees 31

32 Trustee Fees Paid Out-of-Pocket Before 2018, possible deduction for trustee fees paid out-of-pocket Tax Cuts and Jobs Act of 2017 eliminated deduction for taxable years 2018 through 2025 Reimbursements to IRA owner treated as reportable distributions Paid Out of the IRA Alternative to paying IRA fees separately Debit IRA Reimbursements to IRA treated as reportable contributions; potential for excess contribution 32

33 Fees that are not ordinary and necessary expenses for administration of IRA Asset fees Capital expenditures Sales charges Commissions Nontrustee fees Must be Paid Out of the IRA 33

34 Combination Fees Fees combined and charged as one sum Asset manager s fee Brokerage firm s fee Broker s commission Wrap fees No official IRS guidance for IRAs Qualified retirement plan guidance Private Letter Rulings (PLRs) 34

35 Liquidating Assets to Pay Fees Review IRA plan agreement Maintain level of liquidity in IRA 35

36 IRA Fees Activity 36

37 Questions?

38 Thank you for attending IRA Legal Issues We Appreciate Your Opinion Please complete the electronic course survey for this course located on the Ascend 2018 mobile app. Still need to download the app? Paper versions of the survey are located at the Business Center.

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