By April K. Caudill
A lifetime payout was permitted to each of three IRA beneficiaries, according to a recent private letter ruling, even though the decedent had not divided the IRA into separate accounts before her death. This is one of the earliest rulings to take into account provisions of the final 2002 minimum distribution regulations.
The taxpayer, who we will call Andy, was one of three beneficiaries of his mothers IRA when she died in late 1999. The other two were siblings of Andys, and the IRA was left to them in equal shares. Andys mother had not yet reached her required beginning date when she died.
When an IRA owner dies before his or her required beginning date, final regulations state that distributions from the account must be made either within a five-year period following death or under a life expectancy rule. The life expectancy rule provides for distributions over the life or life expectancy of the designated beneficiary, determined in the year following the owners death and reduced by one for each year that elapses thereafter.
The final regulations issued in 2002 also provide that for minimum distribution purposes, a beneficiary determination is made as of Sept. 30 of the year after the death of the IRA owner. Prior to this date, various planning steps may be taken with the account proceeds, such as execution of disclaimers, payout of a charitable interest or the creation of separate accounts.