New and Improved Minimum Distribution Rules for IRA’s and Qualified Plans.


For those of you who have retirement accounts such as IRA’s, Roth IRA’s 401(k)’s and other qualified retirement plans, or to those who may inherit such accounts, new regulations will allow you to begin withdrawing from the accounts after January 1, 2002, subject to much simplified rules.


Everyone who owns these accounts must begin withdrawing money after turning 70 ˝, and may begin withdrawing funds without penalty after turning 59 ˝. The new law affects the mandated distributions that begin after turning 70 ˝.


The new minimum distribution rules provide generally:


1.                  A simple, uniform table to use to determine minimum distributions required during lifetime. Prior to the law, we had to calculate minimum distributions during our lifetime on the basis of our age, the age of our beneficiaries and a calculation method we select. This used to be a confusing process, but no longer. The only exception is if the beneficiary is a spouse who is more than ten years younger than the plan owner, then, the table is not used and the joint life expectancy calculation is used.


2.         The beneficiaries of qualified plans can be determined as late as the end of the year following the plan owner’s death. Therefore, we can change designated beneficiaries at any time, and, the beneficiary can even be changed after death of the owner by using disclaimer. This allows for very strong estate planning opportunities.


Although the rules have been simplified, the minimum distribution rules should be reviewed if you, or the person you shall inherit from, will be soon be subject to the new rules. Everyone should at least review their beneficiary designations to ensure maximum usage of the planning opportunities with this new law.