Life and Death Planning for Retirement Benefits

Introduction

25

Terminology Used in this Book

For meaning of “ retirement plan ,” and the various types of plans, see ¶ 8.3 . The participant is the individual for whom the retirement plan account is established: the employee who has benefits in a qualified plan, or for whom a tax-sheltered annuity or mutual fund account was purchased; or the account owner in the case of an IRA. For ease of understanding, throughout this book, except in some examples, the “participant” is male and the feminine pronoun refers to the participant’s spouse. Of course any statement would apply equally to a female participant and her male spouse. When discussing matters that apply only to qualified plans or 403(b) plans, sometimes employee is used instead of participant. When discussing an issue from the point of view of advising an individual client the participant is sometimes referred to as “the client” or occasionally “the decedent.” A beneficiary is a person or entity who inherits a retirement plan from a deceased participant (or from another beneficiary); someone who holds an “inherited” retirement benefit, as in “An individual’s IRAs held as beneficiary cannot be aggregated with the individual’s own IRAs for RMD purposes.” During the participant’s life, the “beneficiary” means the “beneficiary- apparent,” i.e., the person or entity who is currently named as the participant’s beneficiary and who is accordingly expected (unless something changes) to inherit the account at the participant’s death; see, e.g., ¶ 1.3.03 (B). These definitions of beneficiary always apply in this book, and usually also apply in IRS pronouncements. A source of confusion is that the Code sometimes uses the word “beneficiary” to mean the person whom this book always (and the IRS usually) calls the participant, IRA-owner, or employee. For definitions of “ Successor Beneficiary ” and “ Contingent Beneficiary ,” see ¶ 1.5.12 . For definitions of rollover , direct rollover, indirect rollover, 60-day rollover, trustee-to- trustee transfer, IRA-to-IRA transfer, custodian to-custodian transfer, and plan-to-plan transfer, see ¶ 2.6.01 . Taxable account is the shorthand term for funds or assets that are outside any retirement plan, as in, for example, “The distribution was supposed to be transferred to an IRA but instead, by mistake, the funds were deposited in the participant’s taxable account.” Traditional IRA or account refers to an IRA or retirement plan account that is not a “Roth” IRA or account; see ¶ 5.2.01 .