Life and Death Planning for Retirement Benefits

Chapter 1: The Minimum Distribution Rules

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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 . 1.6.02 Definition of “sole beneficiary” For purposes of the special minimum distribution rules applicable to a spouse-beneficiary (though not for purposes of the spousal rollover), the participant’s surviving spouse must be the “sole” beneficiary. The spouse is the sole beneficiary if she, alone, will inherit all of the benefits if she survives the participant; in other words if she is the sole primary beneficiary. The fact that other beneficiaries are named as contingent beneficiaries (who will inherit if the spouse does not survive the participant) does not impair her status as “sole” beneficiary. Bud Example: The beneficiary designation form for Bud’s IRA provides: “I name my spouse, Louise, as my sole primary beneficiary, to receive 100 percent of all benefits payable under this Plan on account of my death if she survives me. If she does not survive me, the benefits shall instead be paid to my sister Gladys.” The spouse, Louise, is Bud’s sole beneficiary so long as both spouses are alive. She is Bud’s sole beneficiary at his death if she survives him and does not disclaim the benefits. The fact that Gladys is named as a contingent beneficiary does not impair Louise’s status as sole beneficiary. Reminder: If the “separate accounts” rule applies for ADP purposes, the test of whether the spouse is the “sole beneficiary” is applied only to the separate account of which the spouse is beneficiary. Reg. § 1.401(a)(9)-8 , A-2. See PLR 2001-21073 and ¶ 1.8.01 (B). The applicable time for determining whether the participant’s spouse is the sole beneficiary differs depending on which tax provision is being considered:  For purposes of computing RMD s during the participant’s life , see ¶ 1.3.03 .  For purposes of the post-death minimum distribution rules ( ¶ 1.6.03 –1.6.06), the spouse must be sole beneficiary as of September 30 of the year after the year of the participant’s death (the Beneficiary Finalization Date; ¶ 1.8.03 ), and “a” beneficiary on the date of death ( ¶ 1.7.02 ). Reg. § 1.401(a)(9)-8 , A-2(a)(2). In some cases, if the surviving spouse is just one of several beneficiaries on the date of death, it will be possible to “remove” the other beneficiaries (by means of disclaimer, distribution, or establishing separate accounts by 12/31 of the year after the year of