National Catholic Forester

National Catholic Forester 12 Missing required minimum distributions The penalty for failure to take a required minimum distribution (RMD) from an IRA or TXDOL¿HGSODQLVDPRQJWKHKDUVKHVWLQWKHWD[ code: a 50% "excess accumulation" tax on the amount you should have withdrawn. [See the Sidebar on page 14: "RMDs: When and how much?"] Suppose you're over age 70½ and you're required to take a $50,000 RMD by December 31, 2016. If you miss the deadline, you're liable for a $25,000 penalty tax. Naming your estate as EHQHŅFLDU\ ,I\RXGHVLJQDWH\RXUHVWDWHDVEHQH¿FLDU\ RIDQ,5$RUTXDOL¿HGSODQWKH50'UXOHV depend on when you die. If you die before the required beginning date for your RMDs, the entire account balance is required to be GLVWULEXWHGQRODWHUWKDQ'HFHPEHURIWKH¿IWK year following the year that you die. In other words, for a death in 2016, the balance must be distributed no later than December 31, 2021. If you die on or after your required beginning date for taking RMDs, however, the rules are more complicated. Without going into all of the details, WKH50'VIRUWKHHVWDWHRUWKHEHQH¿FLDU\ EHQH¿FLDULHVRIWKHHVWDWHZLOOEHGHWHUPLQHG by referring to IRS tables based on how old you would have been as of the end of the year in which you died. It's often preferable to name an individual EHQH¿FLDU\VXFKDVD\RXQJHUVSRXVHRUFKLOGWR DYRLGWKHFRQIXVLRQDQGWRDOORZWKHEHQH¿FLDU\ RUEHQH¿FLDULHVWRVWUHWFKWKHGLVWULEXWLRQVRYHU longer periods, maximizing tax deferral. 1 2 R e t ire m en t A cc o u nt 5 Tax Traps to Avoid If you're like most people, a large portion of your wealth is set aside in individual UHWLUHPHQWDFFRXQWV,5$VRUTXDOLŅHGUHWLUHPHQWSODQVVXFKDVNRUSURŅW sharing plans. These accounts offer substantial tax advantages, but they're also IUDXJKWZLWKWUDSVIRUWKHXQZDU\+HUHDUHŅYHFRPPRQPLVWDNHVWRDYRLG

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