vANGUARD ARTICLE
iF THE VANGUARD ARTICLE IS STILL IN EFFECT AND ALL BENFICARIES DESTRIBUTIONS ARE BASED ON THE AGE OF THE OLDEST WHAT HAPPENS IF THE OLDEST ELECTS A LUMP SUM?
iF THE VANGUARD ARTICLE IS STILL IN EFFECT AND ALL BENFICARIES DESTRIBUTIONS ARE BASED ON THE AGE OF THE OLDEST WHAT HAPPENS IF THE OLDEST ELECTS A LUMP SUM?
Permalink Submitted by Alan Spross on Fri, 2009-07-10 22:07
Not having read the article, my guess is that reference is either to multiple designated beneficiaries or to qualified trust beneficiaries. If the oldest life expectancy applies, and the oldest takes a lump sum of their share, the other beneficiaries can still take life expectancy RMDs based on the age of the oldest for their respective shares.
Permalink Submitted by Charles Saylor on Sat, 2009-07-11 03:49
sjost, what Vanguard article are you referring to?
Permalink Submitted by Anonymous (not verified) on Sat, 2009-07-11 05:16
Actually, even though I don’t know about this article, here is my take. I assume alan meant these special rules:
If it discusses the case of multiple benes that do not separate accounts in a timely manner (by 12/31 of the year following the year of death) there is a rule that states that if a bene disclaims or takes his/her share as a lump-sum distribution before 9/30 of the year followng the year of death that bene is [u]not[/u] part of the “pool” to determine RMD rules. In other words, the oldest of the remaining benes is used. Again, this would only come into play if separate accounting did not take place by [u]all[/u] – is may be the conservative stance. Some may not see this is as an all or none issue. I do.
pmk
Permalink Submitted by Sherri Jost on Sat, 2009-07-11 13:59
Forbes magazine “Disinherited by Vanguard”
Date- 9/3/07
Permalink Submitted by Anonymous (not verified) on Sat, 2009-07-11 17:04
http://members.forbes.com/forbes/2007/0903/068.html
(this appears to be the online version)
I don’t see the “lump-sum” issue mentioned directly, but I stand by my answer.
An unprobable scenerio which they are trying to mention in the article: Estate is named with other individual benes. Separate accounting is not achieved. All are stuck with the Estate RMD rules – pre-RBD 5-year rule; post-RBD remaining LE of IRA owner.
pmk
Permalink Submitted by Alan Spross on Sat, 2009-07-11 23:48
The name of that article rang a bell with me, and I recall extensive discussions about how client unfriendly these requirements were interpreted to be at the time of the article. This followed previous Vanguard policy of refusing customized beneficiary designations including survival periods for the primary beneficiaries to meet before inheriting. Therefore, Vanguard has a history of trying to restrict beneficiary designations to those they apparently deem to be litigation or investigation free.
I would assume they probably have backed off of some of these requirements OR have lost some business. A related problem is their account platform which results in many more account numbers and therefore IRA accounts since their own mutual funds cannot go into a Vanguard Brokerage IRA account. If they simply adapted all investments to the brokerage IRA agreement like Schwab or Fidelity does, alot of these other problems would disappear.