The Internal Revenue Service (IRS) has established rules for required minimum distributions (RMDs), which are the minimum amounts individuals must withdraw from IRAs and other retirement accounts based on age. However, different rules apply to RMDs when the plan participant passes away, and an heir has inherited a qualified plan or IRA.
Understanding the required minimum distribution rules for plan participants and their beneficiaries following the participants’ deaths can be complex. You may need to consult an Aventura estate planning attorney at Kramer Green to fully understand the rules, which have recently changed, and ensure that you are not running afoul of any tax law and regulations.
When the Participant or IRA Owner Dies On or After the Required Beginning Date
Individuals (and certain trusts known as “see-through trusts”) who inherit defined contribution plans or IRAs after the participant or IRA owner reached his Required Beginning Date (“RBD”) generally are required to receive their distributions over their life expectancy. However, any monies remaining on December 31st of the year which is 10 years after the year the participant or IRA owner died must be paid out by then.
The Required Beginning Date is April 1st after the year the participant or IRA owner reached a certain age. Originally, the age was 70-1/2, but it is gradually increasing to age 75.
Failure to take RMDs as required for beneficiaries of defined contribution plans and IRAs can result in paying excise taxes for that year on the amount not distributed as required.
Certain individuals, known as Eligible Designated Beneficiaries, are favored, and, generally, the 10-year rule does not apply.
Examples of Eligible Designated Beneficiaries include:
- Surviving spouses;
- Minor children of the participant or IRA Owner (However, the 10-year rule applies commencing when the minor child turns age 21).
- Qualified disabled or chronically ill individuals; and
- People no more than ten years younger than the plan participant.
Contact Kramer Green for Advice about Required Minimum Distributions
A Boca Raton estate planning lawyer at Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. can assist you with all aspects of your estate plan, including estate tax issues. We know how to best structure your estate plan to preserve assets and handle the ever-changing laws that directly affect your estate, both now and in the future.
We are here to guide you through the complex legal estate planning process. Contact our office today at (954) 966-2112 or online to schedule a time to discuss your estate planning issues with our Hallandale Beach estate planning attorney.