Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

A. RMD for year of death (regardless of who is the beneficiary). If the participant died on or after his RBD, and had not yet taken the entire RMD for the year of death, the balance must be taken by the end of that year by the beneficiary of the account. Reg. § 1.401(a)(9)- 5 , A-4(a), last sentence. The amount of the RMD for the year of death is whatever the decedent was required to take (because the lifetime distribution rules apply through the year of death); minus what he actually did take in that year. Reg. § 1.401(a)(9)-5 , A-4(a). The beneficiary owns the account once the participant dies, and the participant’s estate has no right to take any distribution from it (unless the estate is the beneficiary). For the effect of a qualified disclaimer on the year-of-death RMD, see ¶ 4.4.10 . For who takes the year-of-death RMD if there are: multiple beneficiaries with respect to one plan or IRA, see ¶ 1.7.06 (A); or with respect to multiple IRAs payable to one beneficiary or to different beneficiaries, see ¶ 1.5.09 . The Code provides that, if the participant dies after the RBD, the remaining portion of the participant’s benefits “will be distributed at least as rapidly as under the method of distributions being used” to calculate the participant’s RMDs during life. § 401(a)(9)(B)(i) . This is called the “ at-least-as-rapidly rule .” The regulations pay lip service to the rule (see Reg. § 1.401(a)(9)-2 , A-5), but make no attempt to comply with it. When a participant dies after the RBD the rate at which he was taking (or was required to take) his lifetime RMDs has no bearing whatever on the determination of RMDs after the year of his death. The “at-least- as-rapidly rule” has been administratively repealed by the IRS. General Comments and Caveats The rules in this ¶ 1.5.04 apply if the participant died on or after the RBD, regardless of whether the participant actually took any distributions before he died. Reg. § 1.401(a)(9)- 2 , A-6(a). Post-death RMDs from a Roth IRA are never determined using rules in this ¶ 1.5.04 ; see ¶ 1.5.03 instead. Reg. § 1.408A-6 , A-14(b). Annual RMDs under paragraphs B–F must begin no later than the end of the year after the year of the participant’s death. Reg. § 1.401(a)(9)-2 , A-5. In addition, an RMD for the year of death itself may be required; see “A” below. In all cases, see ¶ 1.5.10 for the ability of the plan to require faster distribution of the benefits than the RMD rules would require. See ¶ 3.2 regarding the ability of the participant’s surviving spouse to roll benefits over to her own IRA (or elect to treat an inherited IRA as her own); see ¶ 1.6.03 (A), (B), for RMD effects of such a rollover or election. Under the final regulations ( ¶ 1.1.01 ), the life expectancy of the beneficiary payout method is available to a Designated Beneficiary regardless of who (if anyone) was the participant’s beneficiary as of the RBD. This is in contrast to the pre-2001 proposed RMD regulations, which would have severely limited post-death payout options once the participant lived past his RBD.

B. Surviving spouse is sole beneficiary. If the participant died on or after his RBD, leaving his benefits to his surviving spouse as sole beneficiary, the ADP is the surviving spouse’s life expectancy, or what would have been the life expectancy of the deceased participant,