Life and Death Planning for Retirement Benefits

Chapter 1: The Minimum Distribution Rules

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1.6 Special Rules for the Surviving Spouse

The Code provides special minimum distribution rules that apply when the beneficiary is the participant’s spouse. These rules are intended to provide more favorable treatment when the spouse is the beneficiary, though the effect is not always favorable (see ¶ 1.6.05 (C)). For most of the “special deals” the spouse must be the sole beneficiary. In some cases, a trust for the spouse’s benefit can qualify for the same treatment available to the spouse individually; see ¶ 1.6.06 .

“Spouse” vs. “Surviving Spouse”

The minimum distribution regulations often refer to the spouse as the participant’s “surviving spouse” even while they are both alive. Of course, while the participant is alive his spouse is not yet (and may never become) the “surviving” spouse. In this book, as in the regulations, “spouse” and “surviving spouse” are used interchangeably.

Overview of the special spousal rules

There are four special provisions that may apply when the participant’s spouse is named as beneficiary:

A. Lifetime distributions: Much-younger-spouse method. If the participant’s sole beneficiary is his more-than-10-years-younger spouse, the participant’s lifetime RMDs are computed using the Joint and Last Survivor Table rather than the Uniform Lifetime Table. See ¶ 1.3.03 . B. Postponed Required Commencement Date. If the participant dies before his Required Beginning Date (RBD; ¶ 1.4 ) leaving benefits to his surviving spouse as sole beneficiary, see ¶ 1.6.04 regarding a possible later Required Commencement Date for RMDs to the spouse, and ¶ 1.6.05 for related rules if the spouse dies after the participant but prior to her Required Commencement Date. C. Spouse’s life expectancy recalculated. When the surviving spouse is the sole beneficiary, and withdraws benefits using her life expectancy as the ADP, her life expectancy is recalculated annually; see ¶ 1.6.03 (D). Other beneficiaries must use the fixed-term method ( ¶ 1.5.05 ). D. Spouse can roll over inherited benefits. The participant’s surviving spouse can roll over benefits she inherits from the participant to another retirement plan. The spouse does NOT have to be the sole beneficiary to have this right (which, unlike A–C, is not a “minimum distribution rule”). See ¶ 3.2 . A spouse who is the participant’s sole beneficiary also has the right to treat an IRA inherited from the deceased spouse as her own IRA. See ¶ 3.2.03 .