The determination of the required minimum distribution (RMD) following the death of the participant is dependent on three factors:

1. whether the participant dies before or after the required beginning date (RBD),
2. the participant’s designated beneficiary (or, if there is a designated beneficiary), and
3. the plan (or IRA) terms.

If a participant dies before his/her RBD, the distribution period over which the plan must calculate the RMDs is either the five-year period following the participant’s death or the life expectancy of the designated beneficiary. Prior to the final 401(a)(9) regulations, if a plan did not specify the distribution period, the default was the five-year distribution period. The final regulations changed the default to the life expectancy of the designated beneficiary. Therefore, to determine which distribution period applies, or whether the default applies because the plan does not specify the period, the practitioner needs to review the plan terms. Most plans adopted a model amendment to amend for the final regulations. The IRS model amendment provides the life expectancy rule as the distribution period over which to calculate RMDs where the participant dies after his/her RBD. However, the employer has the ability to elect the five-year distribution period. The IRS model IRA agreement (Form 5305) also provides for the life expectancy period.

If the participant dies on or after his/her RBD, the RMD distribution period depends on whether the participant has a designated beneficiary. If the participant has a designated beneficiary, the RMDs for the balance of the employee’s account are based on the designated beneficiary’s life expectancy (single life table [SLT]) in the year following the participant’s death (unless the participant’s life expectancy in the year of death is longer). If the designated beneficiary is the surviving spouse, the spouse’s life expectancy is recalculated each calendar year. However, following the surviving spouse’s death, the plan will use the spouse’s attained age in the year of death, reduced by one for each calendar year thereafter. For a nonspouse beneficiary, the plan determines the distribution period using the beneficiary’s age as of the birthday in the calendar year immediately following the calendar year of the participant’s death, reducing the distribution period by one for each calendar year thereafter. Following the nonspouse beneficiary's death, the plan may continue determining the distribution period using the same methodology (i.e., reducing the distribution period by one for each calendar year). In order to facilitate the use of the remaining portion of the beneficiary's life expectancy, the plan (or IRA) would need to permit the beneficiary to designate his/her own beneficiary. If the participant does not have a designated beneficiary, the applicable distribution period is the remaining life expectancy of the participant in the year of death, reduced by one in succeeding years. Therefore, for the year of death, the plan would use the uniform lifetime table (ULT) to determine the RMD and the SLT for years subsequent to the participant's death. The benchmark year for determining the factor under the SLT would be the year of death. The plan would then reduce the determination period by one for each succeeding year.

Qualified plan and IRA assets generally make-up a significant portion of an individual’s estate. Understanding the interaction of the estate planning rules and the required minimum distribution rules is essential to creating an effective estate plan.