Legal Blog

The Weekly Scenario: Required Minimum Distributions

Question: To be able to delay required minimum distributions (RMDs) from a plan using the ‘still-working’ exception**, an individual cannot own more than 5% of the business. When it comes to determining whether a client meets this 5% requirement, do other family members or partners come into play?

**If you are participating in the retirement plan where you work and if the plan allows, you do not have to take any RMDs from that plan until the year you retire.

Answer: When it comes to determining who is more than a 5% owner, it is necessary to examine all family relationships. Beginning with the individual’s ownership in the business, the tax law applies something known as ‘family attribution rules’. Any ownership in the business by a spouse, child, or grandchild will be included in determining whether a client is more than a 5% owner.

For example, John owns 2% of Ollie’s Dog Food Supplies. His wife, Jane, owns 2% of the company. His 3 children and 3 grandchildren own 1%. John is 70 ½ this year. John cannot use the still working exception because the rules require that any ownership interests in the company belonging to his wife, children and grandchildren will be attributed to him.

John owns a 2% interest, but combined with his family, John owns 10% (more than 5% of the company).

 

 

 

As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.

ABOUT STEVE SHANE

Steve Shane Casual Small

sshane@offitkurman.com | 301.575.0313

Steve 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.

 

ABOUT OFFIT KURMAN

Offit Kurman is one of the fastest-growing, full-service law firms in the Mid-Atlantic region. With over 140 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our eleven offices serve individual and corporate clients in the Virginia, Washington, DC, Maryland, Delaware, Pennsylvania, New Jersey, and New York City regions. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.

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