Minimum IRA Distribution
Requirements Decrease

The Internal Revenue Service ("IRS") recently proposed a new minimum Individual Retirement Account ("IRA") distribution table that will result in smaller required distributions. With the old IRA distribution rules, the owner of the plan is still required to begin taking distributions by April 1 following the year they reach age 70 1/2 or face a 50% penalty. The new table will provide taxpayers with several benefits including:

  • The lower distribution requirements will decrease mandatory payouts and may effectively put the distributee in a lower tax bracket.

  • Upon death of the IRA owner, distributions will be paid out over the life expectancy of the person who inherits the plan. The old rules required the person who inherited the plan to take distributions within 1 to 5 years, thereby forcing that person to pay higher amounts of tax.

  • The new rules permit an extended post death planning period.

The use of the proposed table is available to anyone whether the person has named a beneficiary or the beneficiary is other than a person (for example, a school, church, or charity). The new table calculates the minimum distribution based on the recipient's age and an assumed beneficiary 10 years younger. The old table calculated the minimum distribution using a uniform distribution table based upon a single life.

Since the new table is not effective until January 1, 2002, the IRS is permitting recipients to elect to use the new table rather than the old table for 2001 distributions. Distribution recipients should contact their pension plan administrator or investment advisor to properly make the election for their 2001 distributions.

[][][]

Home Page | Attorneys | Client Listing
News & Publications | Write Us
Last updated 3-Jun-2004.