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November 4, 2010

Deadline For Establishing Separate Accounts- Beneficiaries

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Establishing Separate Accounts – Beneficiaries

If you are one of multiple beneficiaries of a retirement account which you inherited last year, you will be required to use the life expectancy of the oldest beneficiary to calculate your RMD amounts, unless separate accounting occurs by December 31 of this year. If you are not the oldest beneficiary you could be at a distinct disadvantage as the RMD amounts in this case could be substantially higher than if you had been able to use your own life expectancy.  This may be a non-issue in cases where the inherited amounts are relatively small, the age differences are minor and/or if you had already planned to withdraw more than the RMD amount each year. However, if you are not the oldest beneficiary and you wanted to stretch out the distributions as long as possible and also wanted to withdraw the least amount possible, you must make sure your share is separately accounted for by December 31. Talk to your plan administrator or IRA custodian to determine the operational procedures that apply. To get an idea of how much of a  difference it could make if separate accounting occurs by the deadline, use the Required Minimum Distribution Planner at www.72t.net .

Highly Important: If a non-person, such as a charity, non-qualified trust or estate is one of multiple beneficiaries, then the period over which distributions can be taken is shortened, because the account would then be treated as not having a designated beneficiary, unless this non-person beneficiary is removed from the account by September 30 of the year following the year the account owner dies.

 Tip Provided by Denise Appleby

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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