Life and Death Planning for Retirement Benefits

Table of Contents

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1.4.08 Grandfather rule: TEFRA 242(b) elections ...................................................................... 48 1.4.09 Effect of 2009 one-year suspension of RMDs .................................................................. 49 1.5 RMD S AFTER THE P ARTICIPANT ’ S D EATH ........................................................................ 49 1.5.01 Post-death RMD rules: Basics and overview.................................................................... 50 1.5.02 Road Map for determining post-death RMDs .................................................................. 50 Step 1: Gather basic information ...................................................................................... 50 Step 2: Gather specialized information............................................................................. 51 Step 3: Determine whether the participant died before .................................................... 51 Step 4: Are you computing the RMD for the year of death.............................................. 52 Step 5: Are there are multiple beneficiaries? .................................................................... 52 Step 6: Do the benefits pass to a Designated Beneficiary ................................................ 52 Step 7: Compute the RMDs .............................................................................................. 52 1.5.03 Road Map , cont.: RMDs in case of death BEFORE the RBD .......................................... 53 A. RMD for year of death .......................................................................................... 53 B. Surviving spouse is sole beneficiary..................................................................... 53 C. Individual beneficiary who is not the surviving spouse........................................ 54 D. See-through trust. .................................................................................................. 54 E. Estate, non-see-through trust, or other nonindividual........................................... 54 F. Multiple beneficiaries. .......................................................................................... 54 1.5.04 Road Map , cont.: RMDs in case of death AFTER the RBD ............................................. 55 A. RMD for year of death (regardless of who is the beneficiary). ............................ 55 B. Surviving spouse is sole beneficiary..................................................................... 56 C. Individual beneficiary who is not the surviving spouse........................................ 56 D. See-through trust. .................................................................................................. 56 E. Estate, non-see-through trust, or other nonindividual........................................... 57 F. Multiple beneficiaries ........................................................................................... 57 1.5.05 RMDs based on life expectancy of Designated Beneficiary ............................................ 57 1.5.06 Death before the RBD: The 5-year (sometimes 6-year) rule ............................................ 59 1.5.07 Life expectancy or 5-year rule: Which applies? ............................................................... 60 Road Map: Three steps to tell whether the 5-year rule applies. ...................................... 60 1.5.08 Computing RMDs based on participant’s life expectancy ............................................... 62 1.5.09 Aggregation of inherited accounts for RMD purposes ..................................................... 63 1.5.10 Plan not required to offer stretch payout or lump sum ..................................................... 65 1.5.11 Switching between 5-year rule and life expectancy method ............................................ 65 1.5.12 Who gets the benefits when the beneficiary dies .............................................................. 66 1.5.13 What is the ADP after the beneficiary’s death? ................................................................ 67 1.6 S PECIAL R ULES FOR THE S URVIVING S POUSE ................................................................... 68 1.6.01 Road Map of the special spousal rules ............................................................................. 68 A. Lifetime distributions: Much-younger-spouse method......................................... 68 B. Postponed Required Commencement Date .......................................................... 68 C. Spouse’s life expectancy recalculated .................................................................. 69 D. Spouse can roll over inherited benefits ................................................................. 69 1.6.02 Definition of “sole beneficiary”........................................................................................ 69