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Pension Evaluation
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Distribution from Qualified Plans
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Immediate Beneficiary: "A beneficiary designation most commonly used in charitable gift planning to describe which parties get an immediate benefit from a transaction. The most basic type of immediate beneficiary would be a charity that receives an outright gift from a donor. More generally, the term "immediate beneficiary" can also refer to any individual or organization that receives immediate benefits from a trust's assets."

In-Service Withdrawal: "A withdrawal made from a qualified plan account before the holder experiences a triggering event. A triggering event, such as reaching a certain age, or leaving an employer, is often needed to be able to withdraw funds from a plan, such as a 401(k)."

Incentive Trust: "A legally binding fiduciary relationship in which the trustee holds and manages the assets contributed to the trust by the grantor. In an incentive trust arrangement, the trustee must adhere to specific requirements set out by the grantor regarding what conditions the trust's beneficiaries must meet in order to receive funds from the trust."

Inchoate Interest: "Interests, generally property interests, that are likely to vest but have not yet actually done so. The inchoate interest usually is dependent on an event occurring that triggers the interest, such as a relative's death triggering an inheritance. The interest that the inheriting relative has in the inheritance is inchoate until the death occurs, at which point it becomes a real interest. "

Incidents of Ownership: "Any interests or rights that an individual maintains in an asset, including property and insurance, that allow the person to change, modify, use or benefit from that asset. This is important for determining estate taxes. An individual can reduce the size of his or her estate by gifting assets to beneficiaries, but, to avoid estate tax on the gift, the original owner must not retain any incidents of ownership in the gifted assets."

Income in Respect of a Decedent (IRD): "Money that was due to a decedent and will pass through to the recipient or estate as income during that tax year. The recipient (beneficiary) must declare the money as income in respect of a decedent (IRD) for any year in which income is received. The estate must also claim the income, but may claim a deduction in the amount of income tax due on the IRD."

Income Splitting: "A tax reduction strategy employed by families living in areas that are subject to bracketed tax regulations. The goal of using an income-splitting strategy is to reduce the family's gross tax level, at the expense of some family members paying higher taxes than they otherwise would."

Income Spreading: "A tax reduction strategy that is typically used by people with highly volatile incomes to reduce the overall marginal tax rate paid on a large sum of income. This strategy involves particularly large sources of income and dividing the amount realized over a period of years in order to reduce the overall amount of taxes paid."

Independent 401(k): "A 401(k) plan set up for an individual running a sole proprietorship or a small business with a spouse/immediate family member. Plan contribution limits for the individual are equal to a typical company-sponsored 401(k), but the sole proprietor can also make an employer contribution to an independent 401(k), thereby raising the total contribution allowed.
The independent 401(k) may also be called a "solo 401(k)" or an "indie K"."

Indirect Rollover: "A method of transferring assets from a tax-deferred 401(k) plan to a traditional individual retirement account (IRA). With this method, the funds are actually given to the employee via check to be deposited into their own personal account. With an indirect rollover, it is then up to the employee to redeposit the funds into the new IRA within the allotted 60 day period to avoid penalty."

Individual Retirement Account (IRA): "An investing tool used by individuals to earn and earmark funds for retirement savings. There are several types of IRAs: Traditional IRAs, Roth IRAs, SIMPLE IRAs and SEP IRAs.
Traditional and Roth IRAs are established by individual taxpayers, who are allowed to contribute 100% of compensation (self-employment income for sole proprietors and partners) up to a set maximum dollar amount. Contributions to the Traditional IRA may be tax deductible depending on the taxpayer's income, tax filing status and coverage by an employer-sponsored retirement plan. Roth IRA contributions are not tax-deductible.
SEPs and SIMPLEs are retirement plans established by employers. Individual participant contributions are made to SEP IRAs and SIMPLE IRAs.
Also referred to as "individual retirement arrangements"."

Individual Retirement Annuity: "A retirement investment vehicle that is structured similarly to a individual retirement account (IRA), except that in this instance, an annuity contract must be purchased, subject to a number of conditions which must be met. An individual retirement annuity must be issued in the owner's name, and only the annuity owner or their surviving beneficiaries are eligible to receive benefits from the contract. Annuity payments may be made by persons other than the primary holder."

Inheritance: "All or part of a person's estate/assets that is given to an heir once the person is deceased. An inheritance is typically a cash endowment given to younger heirs of the deceased, however any assets can be considered as part of an inheritance, such as stock certificates or real estate. If a will is not in place at the time of death, determining the rightful heirs of the deceased's estate becomes a much more complicated matter."

Inheritance Tax: "In some states in the U.S. (and in the United Kingdom), a tax imposed on those who inherit assets from a deceased person. The tax rate for inheritance taxes depends on the value of the property received by the heir or beneficiary and his/her relationship to the decedent.
Inheritance tax is known in some countries as a "death duty" and is occasionally called "the last twist of the taxman's knife"."

Inherited IRA: "An individual retirement account that is left to a beneficiary after the owner's death. If the owner had already begun receiving required minimum distributions (RMDs) at the time of his or her death, the beneficiary must continue to receive the distributions as already calculated or submit a new schedule based on his or her life expectancy."

Inherited Stock: "A stock that an individual obtains through an inheritance after the original holder has died. The cost basis for the stock is based on the market value of the security upon the donor's death. If the stock value increased during the time it was held by the deceased, its cost basis is "stepped up" when ownership is transferred ."

Insurance Trust: "An irrevocable trust set up with a life insurance policy as the asset, allowing the grantor of the policy to exempt asset away from his or her taxable estate.
Once the life insurance policy is placed in the trust, the insured person no longer owns the policy, which will be managed by the trustee on behalf of the policy beneficiaries when the insured person dies.
The insurance trust, or irrevocable life insurance trust (ILIT), is often used to set aside cash proceeds that can be used to pay estate taxes, as the life insurance policy should be exempt from the taxable estate of the decedent."

Integrated Pension Plan: "A pension plan that is tied to an individual's Social Security payments to determine the total benefit that the plan participant should receive.
The actual amount sent to the recipient in a defined benefit integrated pension may be reduced by a dollar amount equal to all or a percentage of the person's annual Social Security payment."

Intentionally Defective Grantor Trust (IDGT): "An estate planning tool used to freeze certain assets of an individual for estate tax purposes, but not for income tax purposes. The intentionally defective trust is created as a grantor trust with a purposeful flaw that ensures that the individual continues to pay income taxes, as income tax laws will not recognize that assets have been transferred away from the individual.
For estate tax purposes, however, the value of the grantor's estate is reduced by the amount of the asset transfer. The individual will "sell" assets to the trust in exchange for a promissory note of some length, such as 10 or 15 years. The note will pay enough interest to classify the trust as above market, but the underlying assets are expected to appreciate at a faster rate."

Inter-Vivos Trust: "A fiduciary relationship used in estate planning that is created during the lifetime of the trustor. Also known as a living trust, this trust has a duration that is deemed at the trust's creation and can entail the distribution of assets to the beneficiary during or after the trustor's lifetime. The opposite of an inter-vivos trust is a testamentary trust, which goes into effect upon the death of the trustor. "

Intestacy: "The condition of an estate of an individual who dies with property valued greater than outstanding debts, but in which there is not a valid will present. Intestacy may also exist if an existing will does not cover an entire estate. In common law systems, property of an estate in intestacy will typically first go to a spouse, then to children and descendants."

Intestate: "The act of dying without a legal will. Determining the distribution of the deceased's assets then becomes the responsibility of a probate court."

Investment Horizon: "The total length of time that an investor expects to hold a security or portfolio. The investment horizon is used to determine the investor's income needs and desired risk exposure, which is then used to aid in security selection."

Involuntary Cash-Out: "Distributing the balance of a participant's retirement account under a qualified plan without the written consent of the participant, the participant's spouse or beneficiary."

IRA Adoption Agreement and Plan Document: "A contract between the owner of an individual retirement account and the financial institution where the account is held. The IRA adoption agreement and plan document must be signed by the account owner before the IRA can be valid. It contains basic personal information about the account holder (such as address, date of birth and Social Security number) and lays out the detailed rules regarding the retirement account."

IRA Asset Will: "A document that specifies how the assets in an individual retirement account (IRA) should be distributed upon the account owner's death. An IRA asset will is used instead of a financial institution's boilerplate beneficiary designation forms to provide a greater level of detail about how retirement account assets should be distributed."

IRA Plan: "A plan that individuals may establish to arrange and plan for retirement. Generally, an IRA plan allows you to save money and defer taxes until you retire. IRA plans have annual contribution limits that are established by the government and rise gradually with inflation; individuals age 50 and older can make slightly higher "catch-up" contributions."

IRA Rollover: "A transfer of funds from a retirement account into a Traditional IRA or a Roth IRA. This can occur either through a direct transfer or by a check, which the custodian of the distributing account writes to the account holder who then deposits it into another IRA account."

IRA Transfer: "The transfer of funds from an Individual Retirement Account (IRA) to another type of retirement account or bank account. IRA transfers are split into two categories: direct and indirect. A direct transfer involves moving the assets, such as stocks and mutual funds, currently held in an IRA account and moving them to a different account without liquidating them. An indirect transfer involves liquidating the assets in the current IRA account and using the cash to open another IRA account."

Irrevocable Beneficiary: "A beneficiary in a life insurance policy or segregated fund contract whose compensation cannot be changed without his or her consent."

IRS Publication 517- Social Security and Other Information For Members of the Clergy & Religious Workers: "A document published by the Internal Revenue Service that details how members of the clergy or other religious workers are to pay Social Security and Medicare taxes. These two types of taxes are collected through either the Self-Employment Contributions Act (SECA) system or the Federal Insurance Contributions Act (FICA) system, but not both. IRS Publication 517 indicates which forms of income are subject to SECA and which are subject to FICA rules."

IRS Publication 536- Net Operating Losses for Individuals, Estates and Trusts: "A document published by the Internal Revenue Service (IRS) that provides guidance to individuals who have more deductions than income in a given tax year. If the total deductions a taxpayer claims are greater than that taxpayer's income for the year, the taxpayer is said to have a net operating loss (NOL). The NOL loss is typically caused by deductions related to business expenses, casualty or theft, moving expenses, rental property expenses or expenses related to being an employee."

IRS Publication 554: "A document published by the Internal Revenue Service (IRS) that provides seniors with information on how to treat retirement income, as well as special deductions and credits that are available. IRS Publication 554 outlines what sources of income are taxable and nontaxable, including retirement plans, Social Security and insurance proceeds. The document also lists common itemized deductions, such as medical care, long-term care, nursing services, medicine and hospital services."

IRS Publication 560- Retirement Plans for Small Businesses (SEP, SIMPLE, and Qualified Plans): "A document published by the Internal Revenue Service (IRS) that provides information for business owners who wish to set up retirement plans for themselves and their employees. It outlines what type of plan to set up, how to set it up, how much can be contributed, how much is deductible, how to treat distributions and how to report information about the plan to both the IRS and to employees.
IRS Publication 560 provides specific information for Simplified Employee Pension (SEP), SIMPLE IRAs, and qualified plans, which include Keoghs (for the self-employed) and 401(k)s. "

IRD Publication 571- Tax-Sheltered Annuity Plans (403(b) Plans) For Employees of Public Schools and Certain Tax-Exempt Organizations: "A document published by the Internal Revenue Service (IRS) that provides tax information for filers who have a 403(b) retirement plan. IRS Publication 571 indicates who can contribute to a 403(b) plan, the maximum contribution that can be made to a 403(b) plan during the year, rules regarding excess contributions, and the rules regarding rollovers or distributions.
Contributions for a 403(b) plan are generally reported in an employee's W-2 by the employer, and do not need to be reported by the individual employee to the IRS."

IRS Publication 575: "A document published by the Internal Revenue Service (IRS) that provides information on how to treat distributions from pensions and annuities, and how to report income from these distributions on a tax return. IRS Publication 575 also outlines how to roll distributions into another retirement plan."

IRS Publication 590- Individual Retirement Arrangements (IRA): "A document published by the Internal Revenue Service (IRS) that provides information on individual retirement arrangements (IRAs), including how to set up an IRA, how to contribute, how much can be contributed, how to treat distributions and how to take tax deductions for contributions made to IRAs. IRS Publication 590 also provides information on penalties that taxpayers might face if IRA regulations are not followed properly."

IRS Publication 939: "A document published by the Internal Revenue Service (IRS) that provides guidance on how taxpayers are to treat income from pensions and annuities using the General Rule. The IRS breaks monthly income from pensions and annuities into two parts: a tax-free part made up of the money that was contributed by the individual, and a taxable part that represents the positive return on the investment. "


Joint Owned Property: "Any property held in the name of two or more parties. The two parties could be a husband and wife, business partners or any other combination of people who have a reason to own property together. Property that is jointly owned may be held in one of several legal forms including joint tenancy, tenancy by the entirety, community property or in a trust."


Keogh Plan: "A tax deferred pension plan available to self-employed individuals or unincorporated businesses for retirement purposes. A Keogh plan can be set up as either a defined-benefit or defined-contribution plan, although most plans are defined contribution. Contributions are generally tax deductible up to 25% of annual income with a limit of $47,000 (as of 2007). Keogh plan types include money-purchase plans (used by high-income earners), defined-benefit plans (which have high annual minimums) and profit-sharing plans (which offer annual flexibility based on profits).
Also known as an HR(10) plan, Keogh plans can invest in the same set of securities as 401(k)s and IRAs, including stocks, bonds, certificates of deposit and annuities. "

'Kids In Parents' Pockets Eroding Retirement Savings (KIPPERS): "A slang term referring to adult children who are out of school and in their working years, but are still living at home with their parents. These parents face the challenge of managing their own finances and planning for retirement while dealing with the added expense of providing for adult offspring."

KSOP: "A qualified retirement plan that combines an employee's stock ownership plan (ESOP) with a 401(k). Under this type of retirement plan the company will match employee contributions with stock rather than cash. KSOPs benefit companies by reducing expenses that would arise by separately operating an ESOP and 401(k) retirement plans."

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