Legal Blog

The Weekly Scenario: Required Minimum Distributions

Question: What do I need to know about “RMDs” or required minimum distributions?

Answer:  Taxpayers age 70 ½ or older this year must take a Required Minimum Distribution, or “RMD”, from their traditional IRAs (Individual Retirement Arrangements), SEP (Simplified Employee Pension) IRAs, SIMPLE (Savings Incentive Match Plan for Employees) IRAs, or other retirement plan accounts. RMD reporting is required for inherited IRAs as well. RMDs are generally based on the life expectancy of the taxpayer.  Basically, the calculation of the RMD comes down to taxpayer’s account balance in the preceding year’s end, divided by an IRS life expectancy factor. Failure to take the RMD could subject the taxpayer to a 50 percent excise tax. Note the following: 1. For owners of certain retirement plan accounts, it may be possible to hold off until retirement before being required to take an RMD. 2. Those who turn 70 ½ in 2015 must take an RMD before April 1, 2016 – unless they turned that age in the first half of the year. If that’s the case, the first RMD taken must be made before December 31st of this year. 3. First year reporters of an RMD who wait until April will be required to take two RMDs because they are required to report an RMD again before December 31st. So it can be important to begin tax planning for RMDs early. 4. Taxpayers who have forgotten to take RMDs in the past should consult with a tax advisor who will likely advise them to take all RMDs as soon as possible, because of the excise tax mentioned above. As always, if you have any questions or would like to learn more, please let me know.

ABOUT STEVE SHANE

Steve Shane Head Shot for webSteve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates. You can also connect with Offit Kurman via Facebook, Twitter, Google+, YouTube, and LinkedIn.

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