Common use of Life Expectancy Payments Clause in Contracts

Life Expectancy Payments. Under the Life Expectancy Payments option, your beneficiary must withdraw a minimum amount each year beginning in the calendar year following your death. To determine the minimum required distribution amount for a given year, the IRA balance (i.e., generally the fair market value of the Inherited IRA on December 31 of the preceding year) is divided by the applicable denominator. The applicable denominator is derived from the Single Life Expectancy table. For the first distribution year, the life expectancy used is the single life expectancy that corresponds to the age the beneficiary attains on their birthday in the calendar year following the year of your death. Once the applicable denominator is determined for the first distribution year, it is reduced by one in each succeeding year. The life expectancy payment is the required minimum amount to be withdrawn each year; the eligible designated beneficiary may always withdraw an additional amount, including a lump-sum distribution of the remaining balance. If your child, who is under age 21 at the time of your death, elects to take distributions in accordance with the Life Expectancy Payments option, they must generally deplete the entire Inherited IRA by December 31 of year they attain age 31. However, this deadline does not apply if your child is disabled or chronically at the time of your death and required documentation is provided to the IRA Custodian by the applicable deadline. Noneligible Designated Beneficiary If you pass away before your required beginning date, your noneligible designated beneficiary is required to take distribution of the Inherited IRA under the 10-Year Rule. The 10-Year Rule requires depletion of the inherited IRA funds by the end of the tenth calendar year following the year of your death. During the 10-year period they are not subject to a distribution requirement each year because your death is before your required beginning date. Nonperson Beneficiary Your nonperson beneficiary is required to take distribution of the Inherited IRA under the 5-Year Rule. The 5-Year Rule requires depletion of the Inherited IRA by the end of the fifth calendar year following your death. Nonperson beneficiaries taking distributions in accordance with the 5-Year Rule are not subject to a distribution requirement each year. Qualified See- Through Trust Beneficiary Your qualified see-through trust beneficiary must deplete the Inherited IRA in accordance with the Code and Treasury Regulations under either the 10-Year Rule or, if applicable, under the Life Expectancy Payments option. Beneficiary distribution requirements for a qualified see-through trust are dependent on which underlying trust beneficiaries must be taken into account and the status of those beneficiaries. Trustees of a trust named as an IRA beneficiary are strongly encouraged to seek assistance from a competent tax or legal advisor.