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Naming a Beneficiary to Your Retirement Plan |
Nonspouse beneficiaries have new options
If you are the beneficiary of a decedent's qualified retirement plan, and you are not the spouse of the decedent, you now have additional options for distributions. In the past, only a spouse beneficiary was permitted to roll the account into an IRA. Now, beginning in 2007,
if you are the beneficiary, you may roll the distribution into an IRA that has been established to receive the qualified plan.
Under this new option, you will be subject to the rules for
distributions that apply to inherited IRAs, as opposed to the more
strict rules that apply to distributions from qualified plans. Many
qualified plans require beneficiaries to take the entire amount from
the plan within five years of the date of death. The rules that apply
to inherited IRAs allow the beneficiary to take distributions over his
or her life expectancy, thus spreading the tax liability over several
more years. If the decedent was over age 70'/2, the distribution rules
are a bit different. Here you have the option of taking the
distributions from the inherited IRA over your life expectancy, or the
remaining life expectancy of the owner, assuming he or she was still
living.
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