Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

the participant’s death; ¶ 1.8.01 (B)) so that the spouse can be deemed the sole beneficiary as of the Beneficiary Finalization Date.  In the case of the spouse’s right to elect to treat the deceased spouse’s IRA as the spouse’s own IRA ( ¶ 3.2.03 ), she can make this election at any time after the participant’s death provided that she is the sole beneficiary as of the Beneficiary Finalization Date ( ¶ 1.8.03 ). See Reg. § 1.408-8 , A-5(a). 1.6.03 Road Map: How to determine RMDs of surviving spouse This is one of the more confusing aspects of the minimum distribution rules. There are several different ways to compute RMDs for benefits left to (or in trust for) a surviving spouse, though there is only one correct method for each particular situation. Usually, the spousal rollover (see “A”) or election (“B”) provides better results (more deferral opportunities) for the surviving spouse and her beneficiaries than does holding the account as beneficiary (C–E). See ¶ 3.2.01 (A)–(C) for why that is so. See ¶ 3.2.01 (D) for when the spousal rollover or election should NOT be used. See ¶ 3.1.02 (B) for whether to use a rollover or an election. A. If spouse rolls over benefits to her own plan. Unlike other beneficiaries, the surviving spouse has the ability to roll over, tax-free, to her own IRA or to her own account in any other eligible retirement plan, any QRP, IRA, or 403(b) benefits left to her by her deceased spouse. ¶ 3.2.02 – ¶ 3.2.04 . Following such a rollover, the benefits are now in the spouse’s own retirement plan, and are no longer in an “inherited plan.” Accordingly, she takes RMDs as “participant” (¶ 1.3) rather than as “beneficiary” (¶ 1.5) beginning the year after the rollover (Reg. § 1.408-8 , A-7); for requirements applicable to the distributing plan in the year in which the rollover occurs , see ¶ 2.6.03 . For the year following the rollover and later years, the spouse’s RBD and RMDs will be determined in exactly the same manner as would be true for any other participant in that particular type of plan or IRA. For Roth IRAs, there will be no RMDs because Roth IRAs are not subject to the lifetime RMD requirement; see ¶ 5.2.02 (A). For traditional plans and IRAs, see ¶ 1.4 for the RBD and ¶ 1.3 to determine the RMDs. The surviving spouse also has the right to “roll over” inherited benefits to an IRA in the name of the deceased spouse; see ¶ 3.2.07 . If benefits are held in or rolled over to such an “inherited” plan or IRA, see “D” for how to compute the spouse’s RMDs. B. If spouse elects to treat inherited IRA/Roth IRA as her own. Unlike other IRA beneficiaries, the surviving spouse has the ability to elect to treat a traditional or Roth IRA that she (as sole beneficiary) inherits from the deceased spouse as her own traditional or Roth IRA. ¶ 3.2.03 . Once she has made this election, the IRA is treated as the spouse’s own IRA. If the account is a Roth IRA, see ¶ 3.2.03 (B). If it is a traditional IRA, see ¶ 1.4 for the RBD and ¶ 1.3 for how to determine the RMDs. The exception to this rule is that the RMD for the year of the participant’s death is still based on the distribution rules applicable to the decedent. Reg. § 1.408-8 , A-5(a); ¶ 1.5.03 (A); ¶ 1.5.04 (A). If the surviving spouse makes the election in the same year the participant died, RMDs will be calculated based on her being the participant beginning the following year.