IRAs: New Minimum Distributions Rules Allow Planning Opportunities

Shanney-Saborsky, Regina
June 1998
Journal of Financial Planning;Jun98, Vol. 11 Issue 3, p28
Academic Journal
This article discusses new proposed regulations issued by the U.S. Internal Revenue Service (IRS), in the form of amendments and clarifications to the existing proposed regulations under Section 401(a)(9) of the Internal Revenue Code, as of June 1998. The new proposed regulations clearly indicate the position of the IRS that a revocable trust can be a designated beneficiary for purposes of the minimum distribution rules applicable to qualified retirement plans and individual retirement accounts (IRA). From the financial planning perspective, although seemingly narrow in scope, the new rules conceptually address the permitted use of a revocable trust, the spousal consent requirements applicable to distributions and the significance of the beneficiary designation form used by qualified plan consultants and IRA custodians. The new proposed regulations permit minimum distributions to the typical revocable trust used by financial planning professionals and provides informational disclosure requirements that can provide guidance, in general, for both beneficiary designations in the retirement arena. Participants also can satisfy the information requirement with a certified list of all beneficiaries, and a description of the interests of each beneficiary. The availability of the revocable trust as the designated beneficiary for minimum distribution purposes should focus the professional advisor on reviewing not only the dispositive provisions in the traditional wills and trusts used for estate planning purposes, but the beneficiary designations for any qualified plan or IRA to ensure that the ultimate beneficiary is identifiable. Finally, financial planners may want to evaluate the potential ability to use these provisions on a retroactive basis.


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