| The distribution rules required at the death of an | | | | life expectancy of the spouse. When the spouse |
| IRA owner depend on several things: | | | | dies, the distributions continue using the remaining |
| 1. Did the IRA owner die before or after the | | | | life expectancy of the spouse. |
| "required beginning date"? | | | | If the IRA owner dies after the required |
| 2. Who is the beneficiary? | | | | distribution date and the spouse does not make |
| In order to carry out the wishes of the IRA | | | | the election, the distribution must be made over |
| owner, evaluating both practical and estate | | | | the life expectancy of the spouse; however, the |
| planning implications of various decisions during the | | | | life expectancy of the IRA owner can be used |
| IRA owner's life is essential. Important choices | | | | any year it is greater. Taking the attained age of |
| occur when the IRA owner makes his beneficiary | | | | the IRA owner at death and looking in a table |
| election and, if married, by the spouse after the | | | | determines the life expectancy. Then each year |
| death of the IRA owner. | | | | you subtract one. The point here is that the |
| If you do not know the rules as they pertain to | | | | spouse needs to make a comparison every year |
| your choices, you are shooting in the dark. The | | | | to obtain the longest pay out. |
| wrong decision can cost money and likely cause | | | | The "takeaway" from this is that knowledge |
| the distribution of your IRA to be different than | | | | allows for good decisions. The best choice will |
| you would want. | | | | depend on how old the IRA owner is when they |
| Let's make sure you know the rules of the game. | | | | die, the age of the spouse, health status and |
| The first element is the required beginning date. | | | | whether or not there are children or grandchildren |
| For traditional IRAs, SEPs, SIMPLEs, this is Aril 1st | | | | to provide for in a distribution. |
| of the year after turning 70 1/2. This rule does | | | | Non-Spouse Beneficiary |
| not apply to Roth IRAs, which have rules of their | | | | Distributions are required over the remaining life |
| own. | | | | expectancy of the beneficiary if the IRA owner |
| There are several broad categories of | | | | dies before the required beginning date. If there is |
| beneficiaries: | | | | more than one beneficiary, the oldest is used. |
| 1. The spouse. | | | | Heads up: Let's say the IRA owner is a widow |
| 2. A non-spouse beneficiary. | | | | age 80. She names her sister, age 82, and her |
| 3. No beneficiary. | | | | children, ages 55, 58 and 60 as beneficiaries. Her |
| Let's take each of these beneficiary elections and | | | | desire to help her sister causes the IRA to be |
| see how distributions are treated, depending on | | | | distributed over the remaining life expectancy of |
| whether the IRA owner dies before or after the | | | | an 82 year old--probably much quicker than |
| required beginning date. | | | | desired. |
| The Spouse as Beneficiary | | | | If the IRA owner dies after the required beginning |
| If the spouse is the only beneficiary, he or she | | | | date, the distributions must be made over the |
| can make an election that has a bearing on when | | | | longer of the remaining life expectancies of the |
| the distributions must begin. The election is to | | | | owner or beneficiary. |
| treat the owner's IRA as if it were their own. | | | | No Beneficiary |
| Heads up: This election choice is unavailable if a | | | | If the IRA owner dies before the required |
| trust is the beneficiary of the IRA, even if the | | | | beginning date, the entire IRA account must be |
| spouse is the only beneficiary of the trust. A | | | | paid out over five years. |
| rollover may circumvent this problem. | | | | If death occurs after the required distribution |
| If the IRA owner dies before the required | | | | date, distributions simply continue over the |
| beginning date, the spouse is the only beneficiary | | | | remaining life expectancy of the IRA owner. |
| and the election made, the required distributions | | | | I think you can see there are a number of |
| don't have to begin until the IRA owner would | | | | scenarios possible. When you combine this with |
| have turned 70 1/2. The spouse would probably | | | | the complexities of the IRA distribution rules, it |
| elect to apply this rule if the IRA owner was | | | | makes good sense to sit down with your financial |
| younger. | | | | planner, tax attorney and accountant and make |
| If the spouse elects not to be treated as the | | | | sure your IRA, SEP or SIMPLE IRA is coordinated |
| owner, the required minimum distributions (RMD) | | | | with your estate plan and the most probable |
| start right away and are based on the remaining | | | | distribution pattern coincides with your desires. |