Required Minimum Distribution for an estate

[Guest terric]

The scenario that I have is as follows:

Participant of a profit sharing plan is in "pay status" when he dies. His beneficiary is his wife. She dies in the year following the death of her husband. She took a minimum distribution from the plan in the year of her death. Her beneficiary is her estate.

Is there a timeframe in which the estate must be paid the full remaining account balance (i.e. 5 years)?

Thank you for any input.

[Mary Kay Foss]

The five year rule only applies when the participant has not reached the Required Beginning Date. In your situation, the age of the participant is irrelevant. When the beneficiary (spouse) begins distributions they are based upon her life expectancy in the year after the participant's death. The life expectancy is measured by the Single Life Table in the Sec 401(a)(9) regs.

If she were to live for an extended period of time, she could consult the Single Life Table each year to determine the factor for her Required Minimum Distribution. Once she passed away, the factor is fixed and is reduced by one each year.

For example, let's say that she was 69 when her husband died and 70 the next year. Her first RMD would be determined by dividing the value at 12/31 of the year he died by 17.0 (the factor for age 70). The next year when the estate begins distributions it divides the year end balance by 16.0; 15.0 the next year, etc etc.

The plan itself could have a provision for a faster payout, but what I've outlined above is what the regulations say.

The estate could take distributions faster or the executor may ask the court to assign the benefits to the estate's beneficaries but nothing will increase or decrease the distribution period.