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How to compute MRDs: Life expectancy of beneficiary

By David M. Goldman

As long as the sole designated beneficiary is not the surviving spouse the RMD is the life expectancy of the designated Beneficiary.

Each years MRD's is computed by dividing the prior year-end account balance by a life expectancy factor
(called the ?Applicable Distribution Period? (ADP) or divisor) obtained from an IRS table,
with two significant differences:

A. Single Life Table. The beneficiary?s life expectancy is always computed using the Single Life Table (¶ 1.2.03), rather than whichever table was used to compute the participant?s MRDs.

B. Fixed-term method. Post-death MRDs are computed using the fixed-term method (¶ 1.2.04(B)), rather than the annual recalculation method used during the participant?s life, unless the surviving spouse is the sole beneficiary (see ¶ 1.6.06(D)).

A distribution must be taken every year, until the account has been entirely distributed. The ?fundamental laws of MRDs? continue to apply to the beneficiary just as they applied to the participant during the participant?s life.
As long as the beneficiary?s remaining life expectancy is greater than [100 ÷ the plan?s annual growth rate], the plan balance will be growing faster than the beneficiary is withdrawing it.

Full post as published by Florida Estate Planning Lawyer Blog on January 12, 2009 (boomark / email).