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KFS

457 Non-spouse Dealth Distributions

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Hi KFS-

 

The recently passed Pension Protection Act of 2006 apparently has changed the treatment of IRAs and other savings plans such as the 403b and 457 plans.

 

I recommend you look at IRS publication 575, page 31. IRS publications are available in downloadable pdf format at url www.irs.gov. However, this publication does not reflect the latest provisions of the Pension Protection Act of 2006.

 

When you say "death distribution" rules, there are at least several topics to be addressed. First, if the deceased person designated a non-spouse as the beneficiary of the 457 account there are estate tax issues. If the estate has already transferred the 457 account proceeds to the non-spouse beneficiary, when and in what amount does the beneficiary have to start taking in distributions from the account? What is the tax treatment of these distributions to the beneficiary? Are there other options to extend the deferral of federal income taxes such as a transfer to an IRA?

 

For an IRA, the distribution rules depend on the type of IRA. The Roth IRA does not require minimum distributions after age 70 and 1/2 years and the traditional IRA requires minimum distributions according to certain facts including the age of the deceased and the age of the beneficiary.

 

Perhaps you can frame the question more specifically.

 

This is an area where you may wish to seek advice from a lawyer who works estate and or tax matters. You may also wish to consult a fee-only financial planner. I recommend you avoid any financial planner or insurance agent paid on commission as these individuals carry an inescapable conflict of interest.

 

Whatever advice you obtain must be from a person who is aware and has considered all the changes due to the Pension Protection Act of 2006. I understand the statute is over 900 pages and all I have read is the summary posted on the home page of this forum by the webmaster. That summary is over 10 pages! The IRS has posted a number of related documents at url

 

IRS Retirement Documents

 

 

 

Best wishes,

 

Readingteacherspouse

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