IRA life expectancy based on 2 lives

[Guest]

I recently heard of a concept/product/feature called Multi Generational IRA. Supposedly, it allows an MRD to be based on the life expectencies of 2 persons, eg: a father and son. Anyone ever hear of something like this?

Thanks,

[Michael Devault]

I've read a couple of articles on the matter. It's really quite simple: You maintain separate IRA accounts for each beneficiary. For example, if the father has three sons, he keeps three IRAs, each with one his sons as beneificary.

When RMDs are made, the calculations are made on each IRA using the joint life expectancy of the father and the appropriate son. Then, at the father's death, the remaining balance is distributed over each sons' life, and each son names a new beneficiary.

Hope this helps.

[Guest Mary Ann]

When a joint life is calculated for two people who are NOT husband and wife, the age difference can be no more than 10 years. So, Grandfather (age 71) and Grandson (age 14) would need to use the ages of 71 and 61 to calculate the minimum required distribution. A husband and wife can use actual ages.

[BPickerCPA]

The MDIB rules, which effectively assumes a non spouse beneficiary to be 10 years younger, do not apply after death. Therefore, a grandchild could use their own actual age to compute after death distributions. That's how you "stretch" the IRA.

Barry

[Guest Mary Ann]

Well. . . . I was responding to the comment made by Michael Devault, who said "When RMDs are made, the calculations are made on each IRA using the joint life expectancy of the father and the appropriate son." That sounded to me as though individual ages were being used for the sons when calculating the MRD. Actually, the joint life expectancy would be identical in all three cases because of the 10 year limitation.

[Michael Devault]

It seems that I was incomplete in my response, but technically correct. While the father is alive, he performs two calculations each year on each of his IRAs. One is an RMD calculation which uses the actual joint life expectancy of he and the appropriate son/beneficiary. The other is the MDIB calculation, using a life expectancy using his age and an assumed beneficiary's age no more than 10 years younger. Then, his required distribution is that which is greater.

The end result is that, while living, his distribution is obviously based on the MDIB calculation. But, after his death, payments to each beneficiary/son are based on the remaining life expectancy of each son (because of the use of multiple accounts), thereby stretching the payments into multiple generations.

Sorry for the confusion. This is one of those rare instances where everyone is right.