RMD’s for beneficiary IRA begun before 2002
Here is the scenario:
IRA owner died in 1997
Inherited IRA set up in 1998
How is the 2008 divisor calculated, considering the new 2002 tables?
In 1998 it would have been based on the old life tables. Can I now use the new life table, and if so, do I go back to the beni’s age in 1998 or 2002 to find what the original devisor would have been?
To ask more generically, if the RMD’s on an inherited IRA began before 2002, is the beni locked into the old table? If they can use the new table, what year is used to find the first divisor from which to subtract 1 for each subsequent year?
Thank you in advance
Permalink Submitted by Alan Spross on Mon, 2008-06-02 20:12
The new tables could have been used starting in 2002. In this case, the non spouse beneficiary’s attained age in 1998 would be used to enter the new table and the divisor would be reduced by 1.0 for 1999 and each year thereafter. By this year, the total reduction would be 10.0.
A spouse beneficiary can also use the new tables, but a sole spouse beneficiary can re calculate, meaning that the actual table divisor applies each year rather than the 1.0 reduction applying to years after the first RMD year.
If a non spouse beneficiary is just now making the change to the new tables, it means that a figure somewhat in excess of the actual RMD requirement was taken out for 2002-2007.
Permalink Submitted by Kevin Calandro on Mon, 2008-06-02 20:39
Thank you Alen. So is it correct then that a spouse that is not the sole beneficiary MUST use the -1 method? Only if they are the sole beneficiary they can use their recalculated life expectancy, yes?
Permalink Submitted by Alan Spross on Mon, 2008-06-02 21:08
Right.
Also, if the IRA has multiple individual beneficiaries and separate accounts were not established by the deadline, the age of the oldest beneficiary must be used and the 1.0 applied to that divisor each year.
Permalink Submitted by Kevin Calandro on Mon, 2008-06-02 21:25
Thanks again…one more:
If there are multiple beni’s including a spouse, does the spouse lose the spousal rollover option?
Permalink Submitted by Al Fry on Mon, 2008-06-02 22:37
No.
Permalink Submitted by Alan Spross on Mon, 2008-06-02 23:29
Yes, the spouse can still roll over any amounts in excess of their share of the RMD for this year to their own IRA. But the divisor for the remaining beneficiaries would not change from that previously described in changing over to the current tables since the spousal rollover will be done long after the deadline for creating separate accounts.
The spouse also lost the option of not taking RMDs until the year decedent would have reached 70.5 in the event decedent passed prior to that year. Spouse must be sole beneficiary to get that deferral.
Permalink Submitted by Al Fry on Tue, 2008-06-03 04:31
Alan – are you saying that if my spouse and child are 50-50 benes on my IRA, and each go to inherited IRAs by 12/31 in yfd, that my spouse loses her deferral option? I did not know that!
Permalink Submitted by Alan Spross on Tue, 2008-06-03 05:14
No, not in the case where the separate accounts are established by the 12/31 following year of death. But the poster’s example did not make that deadline and therefore that surviving spouse was unable to establish sole beneficiary status.
Following copied from IRS Regs (also applies to IRAs):
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(2) If the employee’s benefit in a defined contribution plan is divided into separate accounts and the beneficiaries with respect to one separate account differ from the beneficiaries with respect to the other separate accounts of the employee under the plan, for years subsequent to the calendar year containing the date as of which the separate accounts were established, or date of death if later, such separate account under the plan is not aggregated with the other separate accounts under the plan in order to determine whether the distributions from such separate account under the plan satisfy section 401(a)(9). Instead, the rules in section 401(a)(9) separately apply to such separate account under the plan. However, the applicable distribution period for each such separate account is determined disregarding the other beneficiaries of the employee’s benefit only if the separate account is established on a date no later than the last day of the year following the calendar year of the employee’s death. For example, if, in the case of a distribution described in section 401(a)(9)(B)(iii) and (iv), the only beneficiary of a separate account under the plan established on a date no later than the end of the year following the calendar year of the employee’s death is the employee’s surviving spouse, and beneficiaries other than the surviving spouse are designated with respect to the other separate accounts with respect to the employee, distribution of the spouse’s separate account under the plan need not commence until the date determined under the first sentence in A–3(b) of §1.401(a)(9)–3, even if distribution of the other separate accounts under the plan must commence at an earlier date. Similarly, in the case of a distribution after the death of an employee to which section 401(a)(9)(B)(i) does not apply, distribution from a separate account of an employee established on a date no later than the end of the year following the year of the employee’s death may be made over a beneficiary’s life expectancy in accordance with section 401(a)(9)(B)(iii) and (iv) even though distributions from other separate accounts under the plan with different beneficiaries are being made in accordance with the 5-year rule in section 401(a)(9)(B)(ii).
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