Common use of EXCESS ACCUMULATION PENALTY Clause in Contracts

EXCESS ACCUMULATION PENALTY. If your beneficiary does not withdraw the amount required to be distributed each year on or before December 31, they may be subject to a 50% excess accumulation penalty tax on the amount not distributed as required. They must report the 50% excess accumulation penalty tax by filing a completed Form 5329 with the IRS along with their payment. For taxable years beginning after December 29, 2022, the amount of the excess accumulation penalty tax is reduced from 50% to 25%. The penalty is further reduced to 10% for beneficiaries who take a corrective distribution and submit a modified federal income return within the applicable correction window. Beneficiaries should consult a tax and/or legal advisor for the correction window applicable to their specific circumstances. Required Distributions to Successor Beneficiaries. Distributions following the death of your beneficiary must be withdrawn by the successor beneficiary(ies) as required by the Code and Regulations including any annual required minimum distributions and the depletion of the entire remaining interest in the Inherited Xxxx XXX by the applicable deadline. The applicable deadline by which the Inherited Xxxx XXX must be depleted by a successor beneficiary is generally the end of the tenth calendar year following your beneficiary’s death or earlier, depending on the circumstances. Failure to withdraw required distributions or deplete the Inherited Xxxx XXX may result in an excess accumulation penalty. BENEFICIARY DISTRIBUTIONS – DEATH OF IRA OWNER ON OR AFTER JANUARY 1, 2020