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Taxation & Legal Considerations in Retirement Flashcards

7 cards from real RMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. A retiree withdraws $20,000 from a traditional IRA at age 57 due to a financial hardship. What is the penalty in addition to income taxes?

    Answer: 10% early withdrawal penalty

    Withdrawals from a traditional IRA before age 59½ are subject to a 10% early withdrawal penalty unless a specific exception applies.

  2. Which of the following is NOT a valid exception to the 10% early withdrawal penalty from an IRA?

    Answer: General financial hardship

    General financial hardship is not a recognized exception to the 10% early IRA withdrawal penalty, unlike the other options listed.

  3. What is the estate tax annual exclusion amount for gifts in 2024?

    Answer: $18,000 per recipient

    The annual gift tax exclusion was increased to $18,000 per recipient in 2024, indexed for inflation.

  4. Under ERISA, who is considered a fiduciary with respect to an employee benefit plan?

    Answer: Anyone who exercises discretionary authority or control over plan management or assets

    ERISA broadly defines a fiduciary as any person who exercises discretionary authority or control over plan management, assets, or administration.

  5. A surviving spouse inherits a traditional IRA from their deceased spouse. Which special option is available only to a surviving spouse?

    Answer: Roll the inherited IRA into their own IRA and treat it as their own

    Surviving spouses uniquely may roll an inherited IRA into their own IRA, allowing them to defer RMDs based on their own age and beneficiary rules.

  6. What does the step-up in cost basis at death mean for inherited appreciated assets?

    Answer: The inherited asset's cost basis is reset to its fair market value at the date of death

    Assets inherited at death receive a stepped-up basis to the fair market value on the date of death, eliminating capital gains on pre-death appreciation.

  7. Which trust structure is commonly used to provide for a surviving spouse while ultimately preserving assets for children from a prior marriage?

    Answer: Qualified Terminable Interest Property (QTIP) trust

    A QTIP trust provides income to the surviving spouse for life while allowing the grantor to control who ultimately inherits the remaining trust assets.