Switching RMD Calcultion method
I have a client with a BDA that we recently moved over from an AT&T plan at Fidelity.
My client inherited the account from her mother who passed away in 2003. Since 2003, my client has been taking distributions based on her deceased mother’s life expectancy. Fidelity required that this methodology be applied. (Her mother had begun taking distributions prior to her death.)
Given the 2006 changes, it would seem that my client can now take over her own single life expectancy since it is longer than her mother’s life expectancy. Does the fact that she has been taking an amount calculated and based on her mother’s life expectancy through 2007 prevent us from using her own single life expectancy to calculate the RMD for 2008 forward?
Any assistance is greatly appreciated.
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Permalink Submitted by Alan Spross on Thu, 2008-02-21 05:17
Unfortuneately, it does prevent use of the client’s life expectancy. The IRS ruled in Notice 2007-7 that in the beneficiary’s life expectancy could only be used in the transfer was done by the end of the year following death. Since this was first available in 2007, any death prior to 2006 would result in compliance not being possible, even though the plan did allow the transfer to be done. The Notice ruled that the inherited IRA RMD must follow the method used by the employer plan. In this case, her mother evidently passed after her RBD, and this method was established. See Q&A 19 in attached link:
http://benefitslink.com/IRS/notice2007-7.pdf