The 5 year rule only applies if the client passed prior to the required beginning date. If so, there is no requirement to distribute anything prior to the end of the 5 year period.

I assume the death was in 2009 due to your reference to 9/30/10. Any beneficiaries that do not create separate accounts by year end and wish to stretch the IRA must use the life expectancy of the oldest beneficiary as of 9/30. But those beneficiaries who did not create separate accounts will not affect the life expectancy divisor of those who will have created their separate accounts by year end.

• Flag as spam
• Log in to Reply

In that case, the 5 year rule does not apply.

But the separate account rules still apply, so they should create separate accounts by the end of the year following the year of death if they want to use their own life expectancies rather than the oldest beneficiary of the decedent who did not cash out or disclaim by 9/30/2010 (assuming death in 2009). If a beneficiary is older than the decedent, the decedent’s remaining life expectancy starting in the year of death.

There is an IRS letter ruling ( PLR 2008-11028) that permits those who fail to take their annual RMD for the first few years to restore the stretch by taking out all the delinquent RMDs and paying the 50% excess accumulation tax (plus interest) on the late RMDs. From there on they can use the stretch produced under the above rules.

If there were non individual beneficiaries as well, the above can be affected.

• Flag as spam
• Log in to Reply