401(k) beneficiaries – Which Life Expectancy to use
Hi, A file came across my desk for a 401(k) participant who passed away in 2019. His trust outline beneficiary designations to be his 20-year-old children to be held in trust. I’m assuming he wanted to control the payouts and investments rather than handing the balance outright to them.
The assets remained in the 401(k) until 2023 and the trustee has been taking RMD distributions and paying them out to each beneficiary.
Should those RMDs be based on each beneficiary’s life expectancy or that of the eldest bene a the time they were still in the 401(k) plan. I believe the plan was using each bene’s DOB and single life to calculate RMD amounts.
The assets were recently distributed to each beneficiary as their own Inherited IRA Trust. Moving forward we would still use each bene’s life expectancy?
I came across Inherited IRA instructions that read as follows: If all multiple beneficiaries have not established separate accounts by that December 31 date, all beneficiaries must take RMDs on the basis of the oldest beneficiary’s life expectancy starting in the year after the owner’s death. https://investor.vanguard.com/inheriting-accounts/rmd-rules-for-inherited-iras
Thanks!
Permalink Submitted by Alan - IRA critic on Wed, 2023-12-20 23:15
Assuming that the trust was qualified for look through and that all trust beneficiaries are individuals, the annual RMDs are based on the age of the oldest trust beneficiary because the separate account rules do not apply to trusts, Subsequent distributions out of the trust to separate inherited IRAs does not change the RMD schedule that would otherwise apply. I suppose that the plan using the age of individuals does indicate that they view the trust as qualified.