Life and Death Planning for Retirement Benefits

Chapter 1: The Minimum Distribution Rules

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a year later than the year of the participant’s death. As explained at “A,” the spouse can roll over benefits from a QRP or 403(b) left to her as beneficiary, but only after taking out, from the QRP or 403(b) plan, the RMD for the rollover year based on her being the beneficiary of the account . With an inherited IRA, in contrast, her election to treat the account as her own is retroactive to the beginning of the election year, so her RMD for the election year (if any) will be based on her being the participant rather than the beneficiary. Presumably the spouse could take a distribution from the inherited IRA and roll over that distribution, rather than simply “electing” to treat the account as her own. If the decedent died after his RBD it would appear that the election is always preferable to a plain “rollover” because it produces a better RMD result (smaller RMD). With an inherited Roth IRA also the “election” gets a better result than a plain “rollover”; see ¶ 5.2.05 (B). C. If spouse is oldest of multiple Designated Beneficiaries. If benefits are left to a see- through trust ( ¶ 6.2.03 ) of which the surviving spouse is the oldest beneficiary, but of which the spouse is not deemed to be the sole beneficiary ( ¶ 1.6.06 (C)), then the trust’s ADP is the life expectancy of the surviving spouse computed just the same as if the oldest Designated Beneficiary were someone other than the spouse. Reg. § 1.401(a)(9)-5 , A-5(c); see ¶ 1.5.03 (D), ¶ 1.5.04 (D), ¶ 1.5.05 . The same is true if the benefits are left, not in trust, to a group of individual Designated Beneficiaries of whom the spouse is the oldest, but that situation is unusual; normally if the spouse is one of multiple outright beneficiaries, she will simply roll over her share of the benefits to her own IRA, not stay as part of the group. When this rule applies, the spouse’s later death will have no impact on the ADP. RMDs will continue, after the spouse’s death, to be computed based on the surviving spouse’s fixed-term single life expectancy. In contrast, when the spouse is the sole Designated Beneficiary, see “E” below for the rule applicable to successor beneficiaries. D. During spouse’s life, if spouse is sole Designated Beneficiary. If the spouse is the sole beneficiary of the deceased participant; or if a trust is the sole beneficiary and the spouse is deemed to be the sole beneficiary of the trust (see ¶ 1.6.06 (A), (B)); then the ADP for distributions to the spouse (or such trust) will generally be the surviving spouse’s life expectancy. (The exceptions would be, if the participant died before his RBD and the spouse or trust elected or was defaulted into the 5-year rule, ¶ 1.5.07 ; or if the participant died after his RBD and the ADP is what would have been the participant’s life expectancy because the participant was younger than the surviving spouse, ¶ 1.5.04 (B).) The spouse’s life expectancy will be determined using the Single Life Table ( ¶ 1.2.03 ) and the spouse’s age on her birthday in each year for which a distribution is required (recalculation method; ¶ 1.2.04 (A)). Reg. § 1.401(a)(9)-5 , A-5(c)(2) (first sentence), A-6. See ¶ 1.6.02 for how to determine whether the spouse is the “sole beneficiary.” We next turn to the RMD rules that apply to benefits left to the spouse that the spouse does not roll over (or has not yet rolled over or elected to treat as her own):