Cleveland, Ohio Estate Planning Attorney
If your retirement portfolio contains a Simple Employee Pension (“SEP”), or Simple IRA, you need to know how the minimum distribution system works. Cleveland, Ohio estate planning attorney Dan Baron provides the following remarks.
One major attraction to IRA’s and other estate planning tools is the ability to accumulate funds inside the plan on a tax-deferred basis. The minimum distribution rules dictate when this tax-sheltered accumulation must start coming out of a retirement plan, and, when they end. Congress enacted the minimum required distribution rules to compel annual distributions from your retirement plan beginning typically at age 70 ½. Estate planning and tax attorneys need to know the minimum required distribution rules because these rules set the outer limits on plan accumulations; moreover, failure to comply with rules results in penalties.
Is Your Retirement Plan Subject to the Rules?
Minimum required distributions apply to “Qualified Retirement Plans.” IRA’s and 403(b) plans fall under the rules of qualified retirement plans. However, Roth IRA’s are subject to the IRA minimum distribution rules only after the participant’s death.
Timing of a Minimum Required Distribution
If your retirement plan contains one of the above mentioned funds, there are many things to understand. First, the starting point for lifetime required distributions is approximately age 70 ½ (or upon later retirement in some cases). The starting point for post-death distributions is measured from the participant’s death. Once the distributions start, the beneficiary must take distributions no later than December 31. However, there are several exceptions to this rule including the “5 year exception” and rollovers. Contact a tax attorney or estate planning attorney to learn more.
How is the Minimum Distribution Determined?
Each year’s minimum required distribution is determined by dividing the prior year-end account balance by a factor from an IRS table. The amount is computed by dividing an annually-revalued account balance by an annually-declining life expectancy factor. Taking more than the required amount in one year does NOT give you a credit you can use to reduce distributions in a later year. Further, the distributions you elect cannot exceed 100 percent of the account balance. Contact Cleveland, Ohio attorney Dan Baron to learn more on how this minimum distribution affects your retirement plant.
As you can see, there are numerous rules that affect your retirement and taxes. Contact a Cleveland, Ohio attorney who can help you understand more about minimum required distributions or other estate planning rules. Cleveland, Ohio estate planning Dan Baron can help you with your tax planning and estate planning goals. Contact Cleveland, Ohio attorney Dan Baron at 216-573-3723.