Estate Planning, Retirement, and Taking Distributions - Contact Your Accountant

There are complex IRS regulations associated with IRAs and other retirement plans. When Clair Law Offices advises its clients concerning estate planning matters, we customarily defer questions concerning retirement distributions to our clients’ accountants and financial advisers. Errors in taking retirement distributions can be extremely costly. This is especially true of required minimum distributions (RMDs).

  • There is a fifty (50%) percent penalty for any required distribution amount not taken.
  • The required beginning date for RMDs of IRAs is generally April 1st of the year after you turn 70 1/2; after that, RMDs are due by the end of the year.
  • In estates, for inherited IRAs, RMDs must generally begin during the year of death of the account’s original owner and be taken by the end of the future year.
  • If you have multiple IRAs, the RMD for each must be calculated separately.
  • RMDs must be taken out in the year an individual dies. It is important that our clients understand that year-of-death RMDs are not reported on the decedent’s final tax returns or estate income tax returns. Beneficiaries are responsible for reporting the income on their tax return. A beneficiary reports the amount the decedent would have taken if she/he had lived. The next year, the beneficiary calculates the required distribution based upon his or her life expectancy.

In conclusion, IRS regulations, especially regarding IRAs and RMDs must be dealt with in a precise manner. The penalties can be extremely expensive if not properly administered. Working with the attorneys at Clair Law Offices, and your accountants, you will be well informed and avoid errors in taking retirement distributions.