Probate & Trust Law Section Conference Manual ... - Minnesota CLE

three years, when Fred would have turned 70½. At that time, the minimum required
distribution is calculated under the Single Life Table based on Wilma’s life
expectancy at the age of sixty-three. If the account has grown to $225,000, the
minimum required distribution would be $9,911.89. ($225,000 divided by 22.7.) For
the next year the minimum required distribution will be based on the life expectancy
of a sixty-four year old under the Single Life Table, and the account will be divided
by 21.8.
3. Reasons not to roll over: If the surviving spouse is younger than 59½, she may choose to keep
the account in the name of the deceased participant so that she can take distributions as a
beneficiary without incurring any penalties (there is a 10% penalty for taking distributions
before the age of 59½.). § 72(t)(1). After she reaches 59½, she would then have the option of
rolling the balance of the account over into her own name. There is not a time deadline for a
surviving spouse to roll an IRA over to her own IRA, so it could be rolled over in the first year
or ten years later. However, any actual distributions to the spouse must be rolled-over within
sixty days.
4. After the roll over: If the surviving spouse has already rolled the IRA over into her own name
and wants to take distributions from the account before she reaches the age of 59½, there is an
exemption from the 10% penalty under § 72(t). The spouse can take distributions from her
account as a “part of a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the [spouse] or the joint lives (or joint life
expectancies) of such [spouse] and [her] designated beneficiary.” § 72(t)(2)(A)(iv). The
surviving spouse does not need to continue the substantially equal payments after reaching the
age of 59½, because distributions at that point would not be subject to the penalty. In addition
to an exception for death prior to age 59½, there are ten other exemptions.
C. Naming a trust
1. Although the general rule is that a designated beneficiary must be an individual, a trust can be
named as a beneficiary of an IRA or qualified plan and still have a designated beneficiary for
minimum required distributions as long as the following five requirements are met.
a. Five requirements
1) The trust must be valid under state law. Treas. Reg. § 1.401(a)(9)-4,
A-5(6)(1).
2) The trust must either be irrevocable or become irrevocable upon the death of
the account owner.
3) The beneficiaries must be “identifiable from the trust instrument.” Treas. Reg.
§ 1.401(a)(9)-4, A-5(6)(3).
4) A copy of the trust instrument or summary information about the trust, its
beneficiaries, and contingencies must be provided to the plan administrator or
custodian by October 31st of the year after the year of the participant’s death. Treas.
Reg. § 1.401(a)(9)-4, A-6(b).
5) Generally, all beneficiaries of the trust must be individuals (no charities or
estates).
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