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joel

stretch IRA

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Facts: 69 year old owner of an IRA

44 year old is sole beneficiary.

HOW DOES THE IRA OWNER ASSURE THAT THE BENEFICIARY TAKE WITHDRAWALS BASED ON LIFE EXPECTANCY?

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You mean, how does he prevent the 49 year old from taking it all at once? He can't do it directly; I think he might be able to designate a trust as beneficiary and then have the 49 year old be the beneficiary of the trust; the trust would restrict payouts as desired. There are requirements to be met to assure that the IRA can look through the trust to determine that the beneficiary is a "named beneficiary" of the IRA and it can use the beneficiary's life expectancy in its RMD calcs.

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Facts: 69 year old owner of an IRA

44 year old is sole beneficiary.

HOW DOES THE IRA OWNER ASSURE THAT THE BENEFICIARY TAKE WITHDRAWALS BASED ON LIFE EXPECTANCY?

Only two ways:

1. Set up a conduit trust that receives each RMD from the IRA and then passes the payment to the beneficiary of the trust. RMDs are based on life expectancy of the trust beneficiary. This requires a lawyer and someone who will act as trustee which costs $.

2. Purchase an annuity policy that pays the MRD as the only distribution option after death of the owner. You have to pay for the cost of the annuity and the agent's commission.

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Facts: 69 year old owner of an IRA

44 year old is sole beneficiary.

HOW DOES THE IRA OWNER ASSURE THAT THE BENEFICIARY TAKE WITHDRAWALS BASED ON LIFE EXPECTANCY?

Only two ways:

1. Set up a conduit trust that receives each RMD from the IRA and then passes the payment to the beneficiary of the trust. RMDs are based on life expectancy of the trust beneficiary. This requires a lawyer and someone who will act as trustee which costs $.

2. Purchase an annuity policy that pays the MRD as the only distribution option after death of the owner. You have to pay for the cost of the annuity and the agent's commission.

Re: 2

Q.: I assume this requires that the owner rollover the acccount balance to an insurer. Is this correct?

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This might accomplish the goal: The 69 year old purchases an annuity. The payout option will be a lifetime income for the 69 year old. Upon the death of the 69 year old the 44 year old survivor will also get a lifetime income. What are the rates for this?

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I don't think a joint and 100% annuity for a non-spouse beneficiary meets the RMD rules. And I doubt anyone would want to do that, locking in low interest rates not only for the first life but the second.

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Bird, a traditional 100% J&S might be a problem but ins co's aren't as limited as plans can be. After mbozek's post, I immediately thought variable J&S life annuity using IRS RMD tables instead of other actuarial tables.

Joel - To get rates, I would ask an insurance broker to run it past a few companies; IRAs and RMDs are old enough that surely the big ins houses can easily structure policies to accomodate... the trick is being sure it's set up properly to begin w/. Maybe ask for quotes on both fixed and variable... the fixed would give you a better idea of the underlying cost of the annuity. You'll have to provide both persons' DOBs and possibly some other info to get the quotes. I'd ask the client if he has a preferred broker and work from there.

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I don't think a joint and 100% annuity for a non-spouse beneficiary meets the RMD rules. And I doubt anyone would want to do that, locking in low interest rates not only for the first life but the second.

See Reg 1.401(a)(9)-5 Q/A-1(e) which allows the MRD requirement for a DC account to be satisfied by an annuity that meets the requirement of 1.401(a)(9)-6 A-4. I have seen descriptions of IRA annuity products that state that the beneficiary payout will be paid only in the form of periodic payments.

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I have seen descriptions of IRA annuity products that state that the beneficiary payout will be paid only in the form of periodic payments.

How does this beneficiary payout scheme affect the payout options available to the owner at age 70.5?

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I have seen descriptions of IRA annuity products that state that the beneficiary payout will be paid only in the form of periodic payments.

How does this beneficiary payout scheme affect the payout options available to the owner at age 70.5?

The payments will meet the MRD requirements if they satisfy the requirements for annuity payments under Reg 1.409(a)-6 which permits distributions over life of owner and non spouse beneficiary which meet the incidential death benefit rules.

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I don't think a joint and 100% annuity for a non-spouse beneficiary meets the RMD rules. And I doubt anyone would want to do that, locking in low interest rates not only for the first life but the second.

See Reg 1.401(a)(9)-5 Q/A-1(e) which allows the MRD requirement for a DC account to be satisfied by an annuity that meets the requirement of 1.401(a)(9)-6 A-4. I have seen descriptions of IRA annuity products that state that the beneficiary payout will be paid only in the form of periodic payments.

A joint/100 percent to survivor annuity requires the title to the money to be transferred to the insurer----I don't like this option.

Can the owner take RMD based on her LIFE EXPECTANCY with any remaining balance, upon her death, distributed to her named beneficiary over the life expectancy of the beneficiary? Is this doable thru the annuity contract?

Many thanks,

Joel

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