Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

continue to be calculated based on Hugh’s life expectancy. Regis uses what’s left of Hugh’s 34- year ADP established at the time of Hugh’s mother’s death. Similarly, if the benefits were payable to the participant’s estate under the 5-year rule ( ¶ 1.5.03 (E)) or over the participant’s remaining life expectancy ( ¶ 1.5.04 (E)), and the estate closes and transfers the inherited retirement plan out to the estate’s beneficiaries (see ¶ 6.1.05 ), the estate beneficiaries can use up whatever is left of the 5-year rule or of the participant’s life expectancy— but the transfer does not allow the beneficiaries to switch over to using a life expectancy payout. Here are the two exceptions to the general rule:  If the participant’s sole Designated Beneficiary was the participant’s surviving spouse, the ADP and/or method of computing life expectancy may change on the spouse’s subsequent death; see ¶ 1.6.05 (C) (if both the participant and his surviving spouse died before the end of the year in which the participant reached or would have reached age 70½) or ¶ 1.6.03 (E) (otherwise) instead of this section.  If the plan documents (or the participant’s beneficiary designation form) required the original beneficiary to survive by a certain period of time in order to be entitled to the benefits, and the named beneficiary survived the participant but failed to meet that condition, see ¶ 1.7.02 . 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. 1.6.01 Road Map 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,