Life and Death Planning for Retirement Benefits

Chapter 1: The Minimum Distribution Rules

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calculation for the surviving spouse can be different for different types of plans (compare “A” and “B”).

“C” explains how to compute RMDs if the surviving spouse is the oldest of multiple designated beneficiaries (as typically might occur with a see-through trust named as beneficiary).

For how to compute RMDs when the surviving spouse is the sole designated beneficiary, see “D.” “E” explains how to compute RMDs to the spouse’s successor beneficiaries if the surviving spouse dies while taking RMDs as sole designated beneficiary. Unlike other beneficiaries, the surviving spouse also has the option, instead of holding the inherited benefits as beneficiary, to roll over benefits inherited from the deceased spouse to the surviving spouse’s own IRA or other plan, or (in the case of an IRA only) to elect to treat an IRA inherited from the deceased spouse as the surviving spouse’s own IRA. “A” explains RMDs to the spouse when there is a spousal rollover of inherited QRP or 403(b) benefits to an IRA. “B” covers computation of RMDs when the spouse elects to treat an inherited IRA as her own. Usually, the spousal rollover (A) or election (B) provides better results (more deferral opportunities) for the surviving spouse and her beneficiaries than does holding the account as beneficiary (C-D). See ¶ 3.2.01 (A)–(C) for why that is so. See ¶ 3.2.01 (D) for when the spousal rollover or election should NOT be used. This book does not cover RMDs to the surviving spouse following a spousal rollover into a nonIRA plan. A. If spouse rolls over QRP or 403(b) benefits to her own IRA. Unlike other beneficiaries, the surviving spouse has the ability to roll over, tax-free, to her own IRA, any QRP or 403(b) benefits left to her by her deceased spouse. See ¶ 3.2.02 . Following such a rollover, the benefits are now in the spouse’s own IRA, and are no longer in an “inherited plan.” Here is how RMDs to the spouse are computed before, during, and after such a spousal rollover: For the year of the participant’s death , RMDs to the surviving spouse from the distributing QRP or 403(b) plan will be based on whatever RMDs the participant was required to take that year, even if the spouse makes her rollover in that same year. Reg. § 1.401(a)(9)-5 , A-4(a); § 1.402(c)-2 , A-3(b)(2), A-12(a) (first sentence). See ¶ 1.5.04 (B). (Of course, if the participant died before his RBD the RMD for the year of death is zero; see ¶ 1.4.07 (C).) That RMD amount may not be rolled over into the spouse’s IRA; see ¶ 2.6.02 (B). She can then roll over to her own IRA the rest of the QRP or 403(b) account. If the rollover occurs after the year of the participant’s death , the RMD for the rollover year will be determined based on the surviving spouse as beneficiary of the account. The QRP or 403(b) plan will have to distribute to the spouse, before the rollover occurs, whatever RMD she is required to take as beneficiary of the account for that year; see “C” or “D” for how to compute