Minimum distributions from inherited funds

[Guest Ed Walker]

Business owners son died 2 years ago leaving father as beneficiary. Father has not withdrawn the account--doesnot plan to until close to the 5 year deadline.

Father is now turning 701/2. Does the son's account need to be considered for minimum distributions?

Thanks for your help

ED

[Belgarath]

Interesting question. I would say no - this account has specific requirements for minimum distribution timing under 1.401(a)(9)-3. The father elected to use the 5 year method. I don't see any requirement in the regs to supercede that election just because the father subsequently attains age 70-1/2. Since the son's account balance cannot be rolled over to the father's employee account balance, then I don't believe it is used when calculating the father's account balance on which a minimum distribution must be made.

[Appleby]

Belgarath is right. The assets that the father inherited are subject to the beneficiary RMD rules- not the RMD rules that apply to the retirement account owner ( the son). Therefore, if the son died before the RBD, and the father is subject to the five year rule, he need not distribute any amount until the end of the five year period.

By the way, was this a sole proprietorship by any chance? ... If the business owner was a sole proprietor, then it may mean that the plan becomes an orphan plan upon his death…which would mean that the assets should be distributed as soon as possible after his death see the thread at http://benefitslink.com/boards/index.php?s...t=0entry76127