Kenneth Vercammen is a Middlesex County Trial Attorney who has published 130 articles in national and New Jersey publications on Criminal Law, Probate, Estate and litigation topics.

He was awarded the NJ State State Bar Municipal Court Practitioner of the Year.

He lectures and handles criminal cases, Municipal Court, DWI, traffic and other litigation matters.

To schedule a confidential consultation, call us or New clients email us evenings and weekends via contact box www.njlaws.com.

Kenneth Vercammen & Associates, P.C,

2053 Woodbridge Avenue,

Edison, NJ 08817,

(732) 572-0500

Wednesday, June 8, 2011

Distribution of Plan Assets to the Participant -New articles, ABA newsletters and Community events

Distribution of Plan Assets to the Participant

As noted above, P usually should not withdraw Plan assets before reaching 59 1/2 to avoid the 10% penalty tax, and must take required minimum distributions after reaching the RBD to avoid the 50% tax (these required distributions provide a floor, not a ceiling; P is always free to withdraw more than the minimum amount). The required minimum distribution is determined actuarially; basically, P divides the amount of assets held in the Plan in any given year by his or her remaining life expectancy. P must elect either to use a fixed life expectancy or to recalculate it each year. By recalculating, P obtains greater deferral during his or her life, but may adversely affect beneficiaries deferral after Ps death (discussed below). If P does not make an affirmative election, P will be deemed to have irrevocably elected to recalculate. P also may have the option of using the joint lives of P and the beneficiary named in the Plan beneficiary designation, which reduces the required minimum distribution each year because the life expectancy is longer.

However, P can only use joint life expectancy if P has a "designated beneficiary" (DB). Designated beneficiary is a tax term of art; it means the beneficiary named on the beneficiary designation form on the earlier of Ps death or RBD, but only if that beneficiary is an individual. In other words, P can have an actual beneficiary, but not a DB, if P names a charity or Ps estate. A trust must qualify as a DB, but only if it is drafted to meet certain tax requirements. If P has named several beneficiaries, each must be an individual (or qualifying trust) for P to have a DB. If several beneficiaries are named, the oldest beneficiarys life expectancy is used. Finally, if P names an individual other than Ps spouse, that individual will be deemed to be no more than 10 years younger than P for purposes of determining Ps minimum required distributions.

Once P has reached the RBD and a DB has been determined, P cannot later change to a younger DB in order to increase the amount of deferral. However, if P later changes to an older beneficiary, or to a non-individual, that new beneficiarys life expectancy will be used and the amount of deferral decreases. In other words, P cannot help, but can only hurt, himself or herself by changing beneficiaries after the RBD.