How an overlooked retirement account changed the planning picture
A retirement account distribution appeared to limit a valuable Net Unrealized Appreciation (NUA) opportunity for an investor with a large concentration in company stock. A closer review of the client’s accounts and tax records revealed missing information that led to a different planning analysis.
A client’s tax return showed a distribution from a tax-deferred account. Because only one retirement account had been disclosed, it initially appeared that the distribution came from the employer-sponsored retirement plan. Under NUA rules, prior distributions from a retirement plan can affect eligibility for the strategy, making it appear that the opportunity was no longer available.
The situation underscored the importance of complete financial disclosure. Without a full picture of a client’s assets and account activity, planning analyses can be based on incomplete assumptions and may not reflect all available options.
At-a-glance
Concentrated stock holdings, incomplete account information, complex tax rules, retirement distribution planning
Verify account activity and reassess NUA and other tax-planning strategies
The planning team conducted a more thorough review of the client’s financial records to determine the source of the reported distribution.
Account Review
Examined retirement account details to identify where the distribution originated.
Tax Analysis
Confirmed that the transaction came from a separate IRA and reflected a Roth conversion rather than a withdrawal from the employer-sponsored plan.
Strategy Reassessment
Revisited NUA eligibility and other planning opportunities using complete account information.
Integrated Planning
Evaluated how the client’s retirement assets, company stock holdings, and tax considerations worked together within the broader financial picture.
With all relevant information available, the planning analysis changed significantly. What initially appeared to be a limitation on the client’s ability to pursue an NUA strategy was ultimately tied to an undisclosed IRA rather than activity within the employer-sponsored retirement plan. The updated review provided a clearer understanding of the client’s options and allowed for a more comprehensive evaluation of potential retirement and tax-planning strategies.
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This case study is based upon real clients. This content is for illustrative purposes only, may not be representative of any future experience of our clients, and is not intended to provide specific recommendations to any individual.