Inherited Money Purchase Pension Plan
Owner of Money Purchase Pension Plan dies (most likely [u]one owner [/u]business and business has not been a going concern for several years). No beneficiaries are listed with the custodian/trustee, and spouse is also deceased (so paid to estate). Two children are named in will. Current custodian/fund sponsor will do whatever executor instructs via a LOI. Children would like to defer as much as is allowed (sizable amount of $). What kind of account must/can they set up? Beneficiary MPPP? Benficiary IRA? What are the steps? Whose life expectancy will RMD’s be based on going forward? Thanks for your expertise!
TG
Permalink Submitted by Alan Spross on Thu, 2010-02-25 00:20
When did owner die, and was death prior to the required beginning date?
Permalink Submitted by Tim Golden on Thu, 2010-02-25 03:17
After RMD’s had started…was in his 80’s……
Permalink Submitted by Alan Spross on Thu, 2010-02-25 18:10
Since the plan owner died after his RBD with a non individual (estate) beneficiary, the RMDs are based on the remaining non recalculated (divisor reduced by 1.0 each year) life expectancy of the decedent. Table I in Pub 590 applies. For example, if owner passed during the year of his 84th BD, the divisor would be 7.1 for RMDs starting in the year following death, then 6.1 the next year, etc. The assets would be totally distributed in about 7 years after his death.
Inherited IRAs should be set up for each will beneficiary, and the executor should request that the plan directly transfer the appropriate share of the assets into each inherited IRA. Note that these funds cannot be rolled over indirectly, so any check made out to either the estate or the beneficiaries cannot be rolled and will become taxable. In addition, if the owner had not satisfied his RMDs for the year of death of prior, those amounts would need to be distributed ASAP and a request filed with Form 5329 for a waiver of the excess accumulation penalties that would apply.
This link includes procedures for assigning plan benefits to an inherited IRA. It should also apply when the decedent held a qualified plan that is to be transferred to inherited IRAs for beneficiaries of an estate:
http://www.ataxplan.com/bulletinBoard/ira_providers.cfm
Permalink Submitted by Tim Golden on Fri, 2010-02-26 03:29
wonderful, thank you, Alan. So there is no need for a beneficiary MPPP as a 1st step…and I understand the RMD schedule (in terms of the reduction by 1 for each year going forward–that jogged an old memory).