Subsequent Minimum Distribution Developments
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Subsequent Minimum Distribution Developments
New developments since publication of the article, "Maximizing Tax Deferral for Funds in Tax-
Favored Retirement Plans and IRAs," include the following:
Rollovers by Nonspouse Beneficiaries from Decedents’ Retirement Plans to IRAs. – The tax
law has long allowed surviving spouses to roll over certain distributions tax-free from their
deceased spouses’ retirement plans to their own IRAs. Such rollovers may allow surviving
spouses to utilize methods of distribution not available for distributions from retirement plans.
Similarly, after 2006, a “designated beneficiary” who is not the decedent’s spouse may
authorize a tax-free trustee-to-trustee rollover from the decedent’s consenting “eligible
retirement plan” to a newly established IRA. For this purpose, a designated beneficiary (1) is
generally an individual specifically designated as a beneficiary by the governing instrument of
the plan and (2) under certain circumstances may include a beneficiary trust. Eligible retirement
plans are qualified retirement plans, section 403(b) tax-sheltered annuities (TSAs), or eligible
state and local government plans – provided their terms allow such rollovers.
The nonspouse beneficiary continues as a beneficiary (and not the owner) of the recipient IRA.
Thus, the tax law treats the IRA as an inherited IRA (that the beneficiary must establish in the
name of the decedent). However, for a decedent dying after 2005, a nonspouse beneficiary may
be able to use the rollover to lengthen the required minimum distribution period, and thus
extend the tax deferral period for plan funds. More specifically, the beneficiary may be able to
lengthen the distribution period from a five-year period under the plan to an IRA period extending
over the beneficiary's life expectancy. To qualify, the plan must make its first annual minimum
distribution, and also consummate the rollover, before the end of the first full calendar year
following the decedent's death
See Chapters 3, 5, 6, and 9 of the Guide for more complete discussions of the taxation of IRA
and retirement plan distributions and the applicable required minimum distribution rules.
(Pension Protection Act of 2006, Pub. L. No. 109-280, § 829(a), (b); I.R.C. §§ 402(c)(11), 403(a)
(4)(b), 403(b)(8)(b), 457(e)(16))(B); Notice 2007-7, 2007-5 I.R.B. __.)
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New developments since publication of the article, "Maximizing Tax Deferral for Funds in Tax-
Favored Retirement Plans and IRAs," include the following:
Rollovers by Nonspouse Beneficiaries from Decedents’ Retirement Plans to IRAs. – The tax
law has long allowed surviving spouses to roll over certain distributions tax-free from their
deceased spouses’ retirement plans to their own IRAs. Such rollovers may allow surviving
spouses to utilize methods of distribution not available for distributions from retirement plans.
Similarly, after 2006, a “designated beneficiary” who is not the decedent’s spouse may
authorize a tax-free trustee-to-trustee rollover from the decedent’s consenting “eligible
retirement plan” to a newly established IRA. For this purpose, a designated beneficiary (1) is
generally an individual specifically designated as a beneficiary by the governing instrument of
the plan and (2) under certain circumstances may include a beneficiary trust. Eligible retirement
plans are qualified retirement plans, section 403(b) tax-sheltered annuities (TSAs), or eligible
state and local government plans – provided their terms allow such rollovers.
The nonspouse beneficiary continues as a beneficiary (and not the owner) of the recipient IRA.
Thus, the tax law treats the IRA as an inherited IRA (that the beneficiary must establish in the
name of the decedent). However, for a decedent dying after 2005, a nonspouse beneficiary may
be able to use the rollover to lengthen the required minimum distribution period, and thus
extend the tax deferral period for plan funds. More specifically, the beneficiary may be able to
lengthen the distribution period from a five-year period under the plan to an IRA period extending
over the beneficiary's life expectancy. To qualify, the plan must make its first annual minimum
distribution, and also consummate the rollover, before the end of the first full calendar year
following the decedent's death
See Chapters 3, 5, 6, and 9 of the Guide for more complete discussions of the taxation of IRA
and retirement plan distributions and the applicable required minimum distribution rules.
(Pension Protection Act of 2006, Pub. L. No. 109-280, § 829(a), (b); I.R.C. §§ 402(c)(11), 403(a)
(4)(b), 403(b)(8)(b), 457(e)(16))(B); Notice 2007-7, 2007-5 I.R.B. __.)
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covered. However, the information provided on this website is not a substitute for the advice of an attorney,
accountant, or other professional; and the author is not offering legal, accounting, or other professional
advice. The material presented on this website is not intended for use, and may not be used, to avoid tax
penalties. If you need legal advice or other professional help, you should seek (from an independent
attorney, accountant, or other competent professional) advice based on your own particular circumstances.