Estate Planning News & Information
Member: American Academy of Estate Planning Attorneys
448 South 400 East, #100 Phone (801) 366-9966
Salt Lake City, Utah 84111 Fax (801) 363-4477
Topic of the Month
IRS Releases Final Regs for IRAs & Retirement
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IRS Releases Final Regs for IRAs and Retirement Plans
The Internal Revenue Service recently released, in T.D. 8987 (April 16, 2002), the long awaited Final Treasury
Regulations for Internal Revenue Code (“IRC”) § 401. These regulations replace Proposed Regulations dating back
to 1987, with modifications. The Final Regulations are effective starting January 1, 2003, but can be used in
calculating Minimum Required Distributions (“MRDs”) for calendar year 2002, as described below. Some of the
key provisions of the Final Regulations are as follows:
MRDs for 2002 and Future Years
For computing MRDs in calendar year 2002, the taxpayer has the option of using the new Uniform Distribution
Table (see below) issued as part of the Final Regulations, using the 2001 Proposed Treasury Regulations, or taking
distributions based on the 1987 Proposed Treasury Regulations. For most taxpayers, the Final Regulations will
produce the lowest required distribution. (T.D. 8987 (April 16, 2002)). MRDs for future years are calculated using
the Final Regulations. (Treas. Reg. § 1.401(a)(9)-1, Q&A 2(a)). The Final Regulations have also corrected the
computation of the life expectancy divisor dealing with a spouse beneficiary.
New Mortality Table
The new regulations provide for an updated mortality table, as mandated under the Economic Growth and Tax
Relief Reconciliation Act of 2001 (“EGTRRA”) (Treas. Reg. § 1.401(a)(9)-9). Under the new Uniform Distribution
Table, the age 70 divisor is increased from 26.2 to 27.4, with all subsequent years adjusted as well. The larger
divisor results in lower MRDs than under the former distribution tables. A copy of the new Uniform Distribution
Table appears at the end of this FaxAlert. The single life divisors used by beneficiaries at the death of the IRA or
Qualified Plan owner (“Owner”) have also changed, as well as the joint life tables used when a spouse is more than
ten years younger than the Owner. (Treas. Reg. § 1.401(a)(9)-9).
Determining the Designated Beneficiary
The date used to determine the designated beneficiary of an IRA or Qualified Plan has been changed to September
30th of the year after the year of the Owner’s death. (Treas. Reg. § 1.401(a)(9)-4, Q&A 4). The 2001 Proposed
Regulations had set the date as December 31, which was problematic, as it is the same date by which the first MRDs
must be paid. Furthermore, the new regulations provide that if the designated beneficiary dies between the Owner’s
date of death and the September 30th determination date, then that designated beneficiary will still be the measuring
life for post-mortem MRDs.
New Disclaimer Rules
One can still use a qualified disclaimer under IRC § 2518 in order to cause a contingent beneficiary to become the
designated beneficiary, and thereby use that new designated beneficiary's life expectancy as the measuring life for
post-mortem MRDs. The new regulations also clarify that beneficiaries can be removed by payout or disclaimer,
but disclaimer or distribution cannot be used to add a beneficiary. This eliminates the possibility of looking through
an estate to get a designated beneficiary. (T.D. 8987 (April 16, 2002)).
Trusts as Beneficiaries
The Final Regulations confirm that where a trust is a beneficiary, all the beneficiaries of the trust are considered in
determining the beneficiary with the shortest life expectancy. Contingent trust beneficiaries are ignored, but a trust
beneficiary whose benefit is merely postponed until the death of another beneficiary, such as a remainder
beneficiary of a trust where another individual is entitled to the income for life, is considered.
The documentation requirements to qualify as a “designated beneficiary trust” have been relaxed by the Final Regs.
Documentation required under the regulations must be provided to the plan administrator or IRA custodian by
October 31st of the year after the Owner’s death. (T.D. 8987 (April 16, 2002)). However, since some people may
have missed the old deadline when the IRS changed the 1987 Proposed Regulations to permit revocable trusts as
beneficiaries, there is a transition rule that allows the trust documentation to be provided by October 31 of 2003.
IRC § 645 permits a revocable trust to be treated as an estate for income tax purposes. This election will not be
effective for purposes of IRC § 401(a)(9), as long as the trust is still treated as a trust under state law.
Furthermore, the new regulations clarify that IRAs or Qualified Plans with multiple beneficiaries can be split after
death so that each separate account will have one designated beneficiary for that account. However, separate
accounts are recognized for MRD purposes only for years after the calendar year containing the date when the
separate accounts were established, or the date of death of the Owner, if later. Thus, to determine the distribution
period to be used for a separate share and disregard the beneficiaries of other separate shares or IRA / Qualified Plan
accounts, the separate share or account must be established no later than the end of the year following the Owner’s
death. (Treas. Reg. § 1.401(a)(9)-8, Q & A 2(a)).
Death Prior to Required Beginning Date
When death occurs before the Required Beginning Date (“RBD”), the default is for the designated beneficiary to use
such beneficiary’s life expectancy (Treas. Reg. § 1.401(a)(9)-3, Q & A 4), rather than the five year rule (which was
the default distribution under the 1987 Proposed Regulations). The new regulations permit a beneficiary who
defaulted to the five-year rule under the old regulations to switch to the life expectancy method provided that any
missed MRDs are taken by the later of December 31, 2003 or the end of the fifth year after the Owner’s death.
Trustee to Trustee Transfers
A trustee to trustee IRA transfer after age 70 ½ will no longer require the transferring trustee to retain the MRD for
that account. This now conforms the trustee to trustee transfer rule with Revenue Ruling 88-38, allowing an IRA
holder to take the MRDs from any IRA account or accounts.
Free Offer! Call our office to request a FREE copy of an Excel spreadsheet used to calculate MRDs based on the
new Uniform Distribution Table, Single Life Expectancies for Death Beneficiaries of IRAs and Qualified Plans, and
the Joint Life Expectancy Tables for cases where the spouse is more than 10 years younger than the Owner.
Our office is also available to assist you and your clients in the analysis and preparation of an integrated estate plan
which considers the income tax and estate, gift, and generation-skipping transfer tax aspects of retirement assets.
2002 UNIFORM DISTRIBUTION TABLE
Age Period Age Period Age Period Age Period
70 27.4 82 17.1 94 9.1 106 4.2
71 26.5 83 16.3 95 8.6 107 3.9
72 25.6 84 15.5 96 8.1 108 3.7
73 24.7 85 14.8 97 7.6 109 3.4
74 23.8 86 14.1 98 7.1 110 3.1
75 22.9 87 13.4 99 6.7 111 2.9
76 22.0 88 12.7 100 6.3 112 2.6
77 21.2 89 12.0 101 5.9 113 2.4
78 20.3 90 11.4 102 5.5 114 2.1
79 19.5 91 10.8 103 5.2 115 1.9
80 18.7 92 10.2 104 4.9
81 17.9 93 9.6 105 4.5
ABOUT Holmgren & Mitton
The law firm of Holmgren & Mitton, L.C. emphasizes estate planning. Randall J Holmgren & Matthew L.
Mitton have practiced law in Salt Lake City for nearly 24 years. They regularly conduct public seminars
on estate planning and related topics. They are members of the American Academy of Estate Planning
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Estate Planning “HOTLINE”
If you have estate planning questions for yourself or a client or customer, call us at (801) 366-9966 and ask for
Randy or Matt. There is no charge for this “HOTLINE” service. You will bring more added value to your clients
and customers. “HOTLINE” information should not be relied on as legal advice without meeting in person with
Let Us Have You For Lunch – A “Lunch & Learn”
Of course … we’re not cannibals, but we would like to have you visit our firm and have lunch with us. This is a
time-efficient way to learn about each other’s business and services. No searching for a restaurant. No hunting
for a parking space. No waiting for slow service. No interruptions by the server or other friends or acquaintances
who drop by the table to say “hi.” No wondering who’ll pick up the check for lunch (we’re buying!). This is a
business meeting, and we can get a lot done in an hour. Come prepared to tell us what you think we can do to
help your business and your clients or customers. We’ll have some specific ideas to add. Bring your brochures,
PowerPoint presentation, yellow pad & pencil, or anything else that will help you tell us who you are and what
you do. So, let us have you for lunch and, while we’re at it, we’ll all learn something valuable about partnering
and networking with each other. Just call (801) 366-9966 and say, “I’d like to schedule a ‘Lunch & Learn’ with
the attorneys at Holmgren & Mitton.” Our friendly staff will take it from there. They’ll schedule a mutually
convenient date, they’ll order the lunch, and they’ll mail/fax you a map showing you how to get to our office, and
where to park. Just call, and it will be a happening.
Free Continuing Education Classes for Professionals
If you would like us to present a Continuing Education class for your company or a group you
work with please call us. We have classes that are pre-approved for continuing education credit
for CPA’s, Financial Planners, and Life Insurance agents.
Free Educational Seminars
If your clients need estate-planning help – from a simple will to something more protective
– invite them to attend one of our free seminars. Topics include probate avoidance,
lawsuit protection, tax planning, IRA and retirement account planning, and a host of other
issues. Where 7 of 10 Americans do not have a basic Will or Trust, it is imperative that
they get this important planning taken care of. Your clients and customers will thank you
for helping them get their “affairs in order.” Tell them about our free seminars. Better yet, invite them to attend
the seminar with you. They will know that you “go the extra mile” when it comes to looking out for their best
interests. With simple slide presentations and a Q&A session, these seminars are acclaimed as "informative and
easy to understand."
For information about dates and times of seminars, and to make reservations,
call (801) 366-9966 or (800) 808-4559 (24-Hour Registration Line).