Inheriting an IRA: Planning Techniques for Primary Beneficiaries MontGuide 200309 Marsha A. Goetting, MSU Kristen G

1. Inheriting an IRA: Planning Techniques for Primary Beneficiaries MontGuide 200309 Marsha A. Goetting, MSUKristen G. Juras, School of Law, University of Montana

2. Marsha A. Goetting MSU Extension Family Economics Specialist P. O. Box 172800 Montana State University Bozeman, MT 59717 406-994-5695

3. 6 MontGuides Individual Retirement Accounts Shopping for an IRA Withdrawals from IRAs When owner is under 59 � When owner is between 59 � & 70 �; turns 70 � Inheriting an IRA: Planning techniques Primary beneficiaries Successor beneficiaries

4. Individual Retirement Accounts www.montana.edu Search: Individual Retirement Accounts

5. IRA Tax Law Changes Economic Growth & Tax Relief Reconciliation Act of 2001

6. If IRA owner dies before withdrawing entire IRA balance�... RMD must continue to be paid to primary beneficiaries

7. Who is beneficiary? Named in IRA contract Written will If no will, Montana Law Intestate Succession

8. �Contract Beneficiaries� Wording My two children: Jack Johns & Jill Smith, equally My children: Jack Johns, 50% Jill Smith, 50%

9. Planning Technique: Designate primary & successor beneficiaries on IRA contract rather than naming them in will

10. Why??? IRS does not consider devisees (by will) or heirs (no will) as �qualified designated beneficiaries�!!!!!!!!!

11. Qualified Designated Beneficiary Preferential rules Can receive RMD from inherited IRA based on his/her own life expectancy

12. Qualified Beneficiary Age Balance Factor 35 IRA $$$ ? 48.5 36 IRA $$$ ? 47.5 37 IRA $$$ ? 46.5 38 IRA $$$ ? 45.6 39 IRA $$$ ? 44.6

13. IRS Regulation If there is NOT a qualified designed beneficiary�

14. Death of owner before RMD: Account must be distributed within 5 years of owner�s death if no qualified designated beneficiary

15. Death of owner after RMD: Account must be distributed over fixed remaining life expectancy of deceased IRA owner reduced by one each year if no qualified designated beneficiary

16. Single Life Table # 3 Year Life Expectancy 2004 (age 75) 13.4 2005 12.4 2006 11.4 2007 10.4

17. Beneficiary Determination Date September 30 of year following death of IRA owner

18. RMD to Beneficiary Must begin by December 31 of year following death of IRA owner

19. Calculation Depends3 Factors Whether spouse sole beneficiary

20. Beneficiary calculation Did IRA owner die before or afterbeginning RMD?

21. Calculation depends Whether beneficiary is �qualified� if so, whether individual, or is there more than one?

22. Beneficiary Designation Surviving  Spouse Special rules apply If before RMD

23. Surviving Spouse Two alternatives Roll over to own IRA Take advantage of special timing rule

24. Death of IRA owner before RMD: Surviving spouse does not have to take RMD until Year in which deceased IRA owner would have turned age 70 �

25. Spouse: sole beneficiaryIRA owner dies in 2004