IRS Clarifies Recent Law Waiving Account Distribution Rules for 2009

HNWElder Law, Estate Administration and Probate

Fredrick P. Niemann, Esq., an Elder Law Attorney

The Internal Revenue Service (IRS) has issued guidance to financial institutions clarifying the new law that allows seniors to avoid making required withdrawals from depleted retirement accounts in 2009.

Taxpayers over 70 ½ years old generally must begin withdrawing a certain percentage of the balance of retirement accounts like IRAs and 401(k)s each year or pay, in addition to income tax, a 50 percent excise tax on the amount that should have been withdrawn but was not. While tax payers who turned 70 ½ in 2008, can delay the 2008 distribution until April 1, 2009, the guidance makes clear that those seniors must still take their withdrawals because the new law only suspends required withdrawals for the 2009 tax year.

Some beneficiaries must deplete an IRA by the fifth anniversary of the IRA owner’s death. The guidance explains that if a beneficiary must take required minimum distributions under the five-year rule and the fifth year is 2009, the beneficiary has an extra year (until 2010) to liquidate the account.

Finally, according the guidance, the IRA trustee is not required to give the IRA owner a notice detailing the required withdrawal for 2009. Instead, the trustee may, if it wishes, send a statement that the required distribution is zero or a statement showing what the required distribution would have been and an explanation of the waiver.

For further information and advice in any elder law matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or

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