Life and Death Planning for Retirement Benefits

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Chapter 1: The Minimum Distribution Rules 63
participant’s life expectancy as the ADP, not the beneficiary’s own life expectancy.
There is no election or choice involved in this situation; the RMDs are calculated
based on the longer of the beneficiary’s life expectancy or the participant’s life
expectancy.
Of course, as always, regardless of who is the beneficiary, the plan may require an even
faster payout, see or the beneficiary may choose to take a faster payout, or a lump sum,
if permitted by the plan, #4.
B. How to calculate the participant’s life expectancy. Use the IRS’s Single Life Table
and find the divisor or “distribution period” (ADP) based on the age the participant
had attained (or would have attained had he lived long enough) on his birthday in the year
of his death. This number, reduced by one, is the divisor for the year after the year of the
participant’s death. The divisor is reduced by one each year thereafter (fixed-term method;
B)). Reg. A-5(a)(2), (c)(3).
Under (see , the beneficiary did not have to take the RMD that
would otherwise normally have been required for the year 2009.
Cookie Example: Cookie died in July, 2006, at age 73, leaving her IRA to her estate. She had
already taken her RMD for 2006. The estate’s ADP is computed as follows. Cookie was born in
November, 1932, so she would have turned age 74 on her 2006 birthday had she lived. The life
expectancy factor for age 74 from the Single Life Table is 14.1. Therefore, the estate’s divisor for
2007 is 13.1 (14.1 minus one). The first RMD to the estate (payable in 2007) is the account balance
as of December 31, 2006, divided by 13.1. This RMD must be taken by 12/31/07. In 2008, the
RMD will be the 12/31/07 account balance divided by 12.1. In 2009 (which would have been the
“11.1” year) there is no RMD; se In 2010, the RMD will be the 12/31/09 account balance
divided by 10.1.
C. Other aspects. The “participant’s life expectancy” is never available as an optional ADP
in cases of death before the RBD (and never applies to Roth IRAs, as to which death is
always “before the RBD”; see A)). Also, the Uniform Lifetime Table applies
during the participant’s life, and also applies for the year of his death A)), but has
no possible application after that point in computing distributions to a beneficiary. The
Single Life Table is the ONLY table used to compute life expectancy payout RMDs from
inherited plans beginning with the year after the year of the participant’s death, regardless
of whether the ADP is the beneficiary’s life expectancy (¶ 1.5.05(A)) or the participant’s
(this .
1.5.09 Aggregation of inherited accounts for RMD purposes
RMDs must be computed separately with respect to each inherited traditional QRP account,
IRA, Roth IRA, and 403(b) account a beneficiary holds. Reg. A-9. Having computed
the RMDs separately for each account, the beneficiary has some flexibility regarding which
account he actually takes the RMDs from. The RMD from each inherited QRP must be taken from
that QRP; multiple QRPs cannot be aggregated with each other for RMD purposes, even if
maintained by the same employer. The flexibility pertains to IRAs and 403(b)s:
A. Accounts that may be aggregated if held by one beneficiary. A beneficiary can take: