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Pension Evaluation
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Collection Laws and Exemptions by State
Tax Treatment in Pension Evaluation
Distribution from Qualified Plans
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Family Limited Partnership (FLP): "A type of partnership designed to centralize family business or investment accounts. FLPs pool together a family's assets into one single family-owned business partnership that family members own shares of. FLPs are frequently used as an estate tax minimization strategy, as shares in the FLP can be transferred between generations, at lower taxation rates than would be applied to the partnership's holdings."

Federal Employee Retirement System (FERS): "A system that became effective in 1987 and replaced the Civil Service Retirement System (CSRS) as the primary retirement plan for U.S. federal civilian employees. Retirement benefits under FERS are accumulated in three ways: a) through Social Security benefits, b) through a basic benefit plan for which the employee is charged a nominal amount and c) through a Thrift Savings Plan (TSP), which comprises automatic government contributions, voluntary employee contributions and matching government contributions."

Federal Insurance Contributions Act (FICA): "A U.S. law requiring a deduction from paychecks and income that goes toward the Social Security program and Medicare. Both employees and employers are responsible for sharing the FICA payments."

Federal Tax Lien: "A federally authorized lien against any and all assets of a taxpayer who has unpaid back taxes. The lien allows the Internal Revenue Service (IRS) to secure or otherwise requisition the taxpayer's property in order to secure payment. Federal tax liens can be assessed for unpaid taxes of any kind, including income, self-employment, gift or estate taxes."

Fiduciary: "1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets for the benefit of the other person rather than for his or her own profit.
2. A loan made on trust rather than against some security or asset."

Fiduciary Abuse: "Describes a situation in which an individual who is legally appointed to manage another party's assets uses his or her power to benefit financially in an unethical or illegal fashion."

Fiduciary Fraud: "Illegal practices committed by financial institutions and financial professionals that constitute a breach of trust between the financial agent and the client. Fiduciaries are legally (and ethically) obligated to act in a way that benefits the client. Fiduciary fraud occurs when a fiduciary acts in his or her own self-interest to the detriment of the client."

Fiduciary Negligence: "A professional malpractice in which a person fails to honor his or her fiduciary obligations and responsibilities. Fiduciary negligence occurs when a fiduciary fails to act on breaches of fiduciary duty when his or her actions could have prevented the infractions."

Final Return for Decedent: "The final tax return filed for an individual in the year of that person's death. Taxpayers who die in any given year will have one final tax return filed on their behalf for this year. A copy of the death certificate must be attached to the return for it to be processed. "

Financial Advisor: "One who provides financial advice or guidance to customers for compensation. Financial advisors can provide many different services, such as investment management, income tax preparation and estate planning. They must carry the Series 65 license in order to conduct business with the public. A wide variety of licenses are available for the services that a financial advisor can provide."

Financial Planner: "A qualified investment professional who helps individuals and corporations meet their long-term financial objectives by analyzing the client's status and setting a program to achieve that client's goals. Financial planners specialize in tax planning, asset allocation, risk management, retirement and/or estate planning.

Also referred to as a "Registered Financial Planner," when the financial planner is registered with the Registered Financial Planner Institute (RFPI)."

Five-Year Rule: "If a retirement account owner dies before the required beginning date for receiving distributions, the beneficiary may distribute the inherited assets over his/her (the beneficiary's) life expectancy or distribute the assets under the five-year rule. Under the five-year rule, the assets must be distributed by December 31 of the fifth year since the retirement account owner's death."

Fixed Authorization Method: "One of three methods by which early retirees of any age can access their retirement funds without penalty before turning 50.5. The fixed amortization method amortizes the retiree's account balance over his/her remaining life expectancy as estimated by IRS tables at an interest rate that is not more than 120% of the federal mid-term rate. Once the withdrawal amount is calculated, it cannot be changed.
The two other methods for early, penalty-free retirement withdrawals are the fixed annuitization method and the required minimum distribution method. Each method can result in quite different distribution amounts. The fixed amortization method can produce higher payments than the required minimum distribution method, but involves complex calculations and runs the risk of not keeping up with inflation.

Fixed Annuitization Method: "One of three methods by which early retirees of any age can access their retirement funds without penalty before turning 50.5. The fixed annuitization method divides the retiree's account balance by an annuity factor taken from IRS tables to determine an annual payment amount. The annuity factor is based on IRS mortality tables and an interest rate that is less than 120% of the federal mid-term rate. Once the payment amount is determined, it cannot be changed."

Flat Benefit Formula: "A method of calculating an employer's contribution to an employee's defined benefit plan whereby the employer multiplies an employee's months of service by a predetermined flat monthly rate."

Form 706 –GS(D): Generation-Skipping Transfer Tax Return for Distributions: "A tax form distributed by the Internal Revenue Service (IRS) that is used to calculate taxes due on trust distributions that are subject to a generation-skipping tax (GST). Form 706-GS(D) is used by any taxpayer who receives a taxable distribution coming from a trust. Specifically, the form is to be filled out by the skip distributee - the person who received the benefit from the generation-skipping trust."

Form 706-NA: United States Estate (And Generation-Skipping Transfer) Tax Return: "A tax form distributed by the Internal Revenue Service (IRS) that used to calculate the generation-skipping transfer tax liability for estates of non-resident aliens of the United States. The generation-skipping tax is levied when the transfer of the decedent's estate takes place rather than when it is received by a beneficiary. A non-resident alien does not live in the United States and is not a citizen."

Form 706: United States Estate (And Generation-Skipping Transfer) Tax Return: "A tax form distributed by the Internal Revenue Service (IRS) used by the executor of an estate to determine if any taxes are owed. Form 706 is to be completed by the executor if the decedent is a U.S. resident or citizen, and the decedent's gross estate is valued at over a certain value (adjusted periodically). Estate taxes are not levied on the pieces inherited by individual beneficiaries but on the estate as a whole. Form 706 is also used to calculate the generation-skipping transfer (GST) tax."

Form 8606: "A tax form distributed by the Internal Revenue Service (IRS) and used by filers who make nondeductible contributions to an IRA. A separate form should be filed for each tax year that nondeductible contributions are made.
Form 8606 is also required whenever: 1) a taxpayer converts a Traditional or SEP IRA into a Roth IRA, or 2) receives an IRA distribution that is attributable to previous nondeductible contributions. If 8606 is not filed in a distribution year, the taxpayer is likely to be forced to pay income taxes (and possibly penalties) on what could be tax-free monies."

Form 8891: "An IRS form that must be completed by any U.S. citizen or resident who participates in or receives annuities from a registered Canadian retirement savings plan or income fund (RRSP and RRIF). Form 8891 is used to report any contributions made, earnings accrued but not distributed and distributions received from these plans, but mainly it is used to elect to defer U.S. tax on your RRSP or RRIF."

Forward Averaging: "Treating lump-sum retirement-plan distributions as if they occurred over a five- or ten-year period. Forward averaging is available only to qualified plan participants who were born before 1936 and meet certain requirements."

Four Percent Rule: "A rule of thumb used to determine the amount of funds to withdraw from a retirement account each year. The four percent rule seeks to provide a steady stream of funds to the retiree, while also keeping an account balance that will allow funds to be withdrawn for a number of years. The 4% rate is considered to be a "safe" rate, with the withdrawals consisting primarily of interest and dividends. The withdraw rate is kept constant, though it can be increased to keep pace with inflation."

Front-End Load: "A commission or sales charge applied at the time of the initial purchase for an investment, usually mutual funds and insurance policies. It is deducted from the investment amount and, as a result, it lowers the size of the investment."

Fully Funded: "A pension plan that has sufficient assets needed to provide for all accrued benefits. In order to be fully funded, the plan must be able to make all the anticipated payments to pensioners. A plan's administrator is able to predict the amount of funds that will be needed on a yearly basis; a determination can be made regarding the financial health of the pension plan."

Fully Vested: "A person's right to the full amount of some type of benefit, most commonly employee benefits such as stock options, profit sharing or retirement benefits. Fully vested benefits often accrue to employees each year, but they only become the employee's property according to a vesting schedule. Vesting may occur on a gradual schedule, such as 25% per year, or on a "cliff" schedule where 100% of benefits vest at a set time, such as four years after the award date."

Funded Status: "The status of pension plan that has accumulated assets that have been set aside for the payment of retirement benefits to employees. Unfunded plans, also called pay-as-you-go arrangements, do not have assets set aside and retirement benefits are usually paid directly from employer contributions"

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