Life and Death Planning for Retirement Benefits

Chapter 1: The Minimum Distribution Rules

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B. Tests for whether spouse is sole beneficiary. The spouse is the sole Designated Beneficiary for purposes of determining the participant’s RMDs “if the spouse is the sole beneficiary of the employee’s entire interest at all times during the distribution calendar year.” Reg. § 1.401(a)(9)-5 , A-4(b)(1). Marital status is determined on January 1 of each Distribution Year for purposes of computing that year’s RMD; therefore the death of either spouse, or a divorce , during the Distribution Year does not cause the spouse to lose her status as “spouse” until the following calendar year. The spouse is deemed to be the “sole beneficiary” for the entire year if she is the sole beneficiary on January 1 of the year and the participant does not change his beneficiary designation prior to the end of the calendar year. Reg. § 1.401(a)(9)-5 , A-4(b)(2). “Sole beneficiary” means sole primary beneficiary; see ¶ 1.6.02 , ¶ 1.7.02 . C. “Trust for spouse” vs. “spouse individually” as beneficiary. If the participant names a trust for the benefit of his more-than-10-years-younger spouse as sole beneficiary, rather than naming the spouse herself, does the participant still get to use the more favorable joint- and-survivor life table to compute his RMDs? ¶ 1.6.06 explains when the minimum distribution rules treat a “trust for the spouse” that is named as beneficiary of a retirement plan the same as “the spouse” him/herself individually for purposes of computing post-death RMDs. The same type of trust for the spouse that qualifies for spouse-is-sole-beneficiary treatment for purposes of post-death RMDs also entitles the participant to use the joint-and-survivor life table for computing his lifetime RMDs. So the answer to the question posed in “C” is yes— if the trust is a qualifying see-through “conduit” trust for the spouse but no if the trust is a typical “QTIP” trust. See ¶ 6.2.03 for the requirements of a see-through trust. See ¶ 6.3.05 for the definition of a “conduit” trust. See ¶ 1.6.06 (C) for contrast with the typical “QTIP” trust. See ¶ 6.2.08 (B) for the documentation that must be provided to the plan administrator if intending to use the joint-and-survivor life table to compute lifetime RMDs when a conduit trust for the more-than-10-years-younger spouse is the sole beneficiary. D. Post-RBD marriage or designation OK. The determination of whether the much- younger-spouse table applies is made separately for each Distribution Year, based on the marriage and beneficiary-designation status as of January 1 of that year. Thus, it can apply for a particular Distribution Year even if the participant had not been married to that younger spouse (or had not named her as his beneficiary) in some prior year when (for example) he turned 70½ or reached his RBD. If the participant has named some other beneficiary, he can change the beneficiary to his spouse (or marry after his RBD and name his new spouse as beneficiary) and use the much-younger-spouse table thereafter. Red and Ginger Example: Red was a widower when he reached his RBD in 2010. In 2014, at age 74, he became friends with Ginger, age 60, and named her as his sole IRA beneficiary . In February 2015 he and Ginger married. Because they were not married on January 1, 2015, Red’s RMDs continued to be determined using the Uniform Lifetime Table in 2015. On January 1, 2016, he was still married to Ginger and she was still his sole IRA beneficiary. Red’s RMD for 2016 will be determined using the Joint and Survivor Life Table using the ages Red and Ginger will attain