More RMD Fun After Death

[austin3515]

We elected the "5 Yeear Rule" in the adoption agreement for RMD's after death, but before distributions begin. Participant dies, spouse is sole designated beneficiary. Particiapnt turned 70.5 in 2009 which was the year of death. So

a) Does the 5 year rule apply, because he died before his distriubtions began? OR

b) Will the beneficiary (who is basically the same age) be required to begin taking distributions by 12/31/2010 (12/31 following end of year of death).

I know the participant can roll it to an IRA, etc.,, but before she rolls it over, the question is do I need to do an RMD using the single life table.

[masteff]

you let us make things all murky in that other thread so you're just 2nd guessing the answer you know...

The new code section from WRERA says:

‘‘(ii) SPECIAL RULES REGARDING WAIVER PERIOD.—

For purposes of this paragraph—

‘‘(I) the required beginning date with respect to any individual shall be determined without regard to this subparagraph for purposes of applying this paragraph for calendar years after 2009, ...’’

So any way you cut it, the participant's RBD is 4/1/10 but died prior to that, so I agree w/ your a) answer.

[austin3515]

you let us make things all murky in that other thread so you're just 2nd guessing the answer you know..

How I wish that was true... I can't seem to get my hands around these rmd's right around the date of death...

So the play here then is

1) leave in the plan for 4 years OR roll to an inherrited IRA for 4 Years (electing the 5 year rule)

2) Roll to an IRA and elect to treat it as her own to switch back to the uniform life?

I guess that was the conclusion in the last thread, it just seems like such a loophole...

[masteff]

The real risk to me is having to remember in the 3rd or 4th year to make the change. The penalty of messing up and getting hit w/ the full taxable income burden in the 5th year is sooooo high. You know the IRA company will most likely screw it up so better to not set it up for failure. Unless you just know the person wants to avoid taking distributions as much as possible then I'd probably point her to your #2 option (IRA and uniform life starting next year).

[mbozek]

you let us make things all murky in that other thread so you're just 2nd guessing the answer you know..

How I wish that was true... I can't seem to get my hands around these rmd's right around the date of death...

So the play here then is

1) leave in the plan for 4 years OR roll to an inherrited IRA for 4 Years (electing the 5 year rule)

2) Roll to an IRA and elect to treat it as her own to switch back to the uniform life?

I guess that was the conclusion in the last thread, it just seems like such a loophole...

Why are you making this so complicated?

While the 5 year rule is the default distribution option, spouse has the right to roll over the plan distribution to her own IRA any time after death until December 31, 2013.

If spouse does not roll out of plan by 12/31/13, entire account balance is subject to MRD by 12/31/14 or payment of 50% excise tax.

There is no RMD because participnat died before RMD commencment date (4/1 of year following year age 70.5 is attained)

[austin3515]

Why are you making this so complicated?

I guess like anything else, the less you deal with something, the more complicated it is. But I will say there do seem to be a lot of rules that appear at first glance to apply to the exact same situation (5 year rule, life expectancy, special rules for spouses, the list goes on).

[mbozek]

Why are you making this so complicated?

I guess like anything else, the less you deal with something, the more complicated it is. But I will say there do seem to be a lot of rules that appear at first glance to apply to the exact same situation (5 year rule, life expectancy, special rules for spouses, the list goes on).

There is a simple solution: tell married clients not to die in the year they turn 70.5 or before April 1 of the following year and the complexities you described go away.

[Belgarath]

Our clients generally won't do anything we tell them to anyway, so I'm sure they would die just to spite us.

[Guest Sieve]

Just wondering, austin, if your heading for this thread ("More RMD Fun After Death") relates to the fun we are having trying to figure out this esoteric issue, or the fun the deceased is having watching us struggle with it . . .!!