Example:

IRA owner dies in 1999. His bene was a qualified trust (under D-5 & D-6). Under the Trust his designated bene's were his wife and child.

Assume bene's take their share outright from the trust before 12/31/2000.

Questions:

1. What life expectancy tables do we use for the bene's. New Regs or Old Reg tables?

2. When are the designated bene's determined: DOD (Old regs) or 12/31/2000 (New Regs)?. If 12/31/2000 (New Regs) can we use separate accounting for exp lifetimes.


Quick Thoughts:
I thought #1 was "New Regs" but in talking to a CPA he thinks that #1 is yet to be decided by the IRS. Do we need to wait for the June 2001 meeting for the IRS's final regs. If so, I find it incredible that this issue isn't decided by now.

For #2 I think IRS is still undecided.

I'd be interested in thoughts of anyone who has talked to the IRS about these issues. Thanks.

I've talked to the IRS, and there are no answers at this time. I think a strong possibility is that the bene will be decided under the old regs (DOD), but they can switch to the computed life expectancy as would be under the new regs.

A word of caution - I usually predict these things wrong!

If death had occurred in year 2000, the distributions could have fallen under the new regs since the first ANNUAL required distributions need not occur until Dec 31, 2001. Since death occurred in 1999 and the first ANNUAL required distribution must have occurred by 12/31/2000, that year's distribution will fall under the old regs. Will future distributions fall under new regs? THe IRS must clarify this.

Had death occurred before the IRA owner's required beginning date, the 5 year rule could apply. But failure to take the required annual distribution in 2000 would preclude any benefit of relief under the new regs.