Value of IRA annuity for RMD purposes.
This is probably a very basic question. Client has several IRA annuities and she has to start taking distributions in 2011.
Do we use the accumulated value or full value as opposed to the cash value or surrender value which is about 25% less in this case for RMD calculation porposes. Thank you in advance.
Permalink Submitted by Alan Spross on Tue, 2011-01-04 23:40
Yes, a basic question, but anything but a simple answer. In most cases the value on which the RMD is based will have to be provided by the insurer due to the complexity of calculating actuarial values. The value of various fringe benefits can generally be disregarded if they do not exceed 20% of the current cash value. 25% less as in your example would probably require the inclusion of the full actuarial value as of 12/31 of the prior year. Here is the 2004 IRS Notice explaining these rules:
http://www.irs.gov/pub/irs-irbs/irb04-26.pdf