Allowable interest rate and beneficiary

L1: Allowable interest rate and beneficiaryHello Group,
I have just started researching this SEPP concept. I have 2 questions:
1) Can you use an interest rate less than the mid-term rate to calculate withdrawal payments? This would keep the principal from ever shrinking.
2) I have no beneficiary listed on my IRA but have been married for many years.
Can Iassume that I can list my wife and perform the appropriate calculationsince community property laws automatically makeher the beneficiary?I would not want to hit a gray area with the IRS over the fact that she is not listed on my IRA even though the law implies that she is the beneficiary. Thanks for your time. JR2006-01-03 18:01, By: JR, IP: [207.200.116.11]

L2: Allowable interest rate and beneficiaryJR,
Don’t take any chances here; get your wife’s name listed as the beneficiary of your IRA…. pronto!
If you don’t,any beneficiary payout could be significantly delayed.
gus2006-01-03 19:05, By: gus, IP: [70.16.149.228]

L2: Allowable interest rate and beneficiaryHello JR:
With respect to performing SEPP calculations:
1. You can use any interest rate (starting at zero) that is less than or equal to 120% of MT/AFR. Therefore, if you so choose, you can tailor your annual distribution amount dollar-by-dollar just by altering the interest rate assumption.
2. Even though you are married this is irrelevant in choosing a life expectancy table. All three tables are available to you: single, joint & survivor and uniform.
TheBadger
wjstecker@wispertel.net
2006-01-03 19:49, By: TheBadger, IP: [66.250.23.25]

L2: Allowable interest rate and beneficiaryI posted a question on Dec 8re/ readjustment of interest rates yearly so as to maintain a fixed yearly percentage withdrawal. Perhaps I was not clear in my post at that time.
The responses seemed to statethat once Ichose a percentage of the allowable interest rate, I had to stay with that same percentage forever. In other words, if my first calculation used 120% of the applicable interest rate, then all subsequent yearly recalculations would have to use 120% of the latest allowable interest rate.
The above response seems to indicate that the percentage of the allowable interest rate can be tweaked yearly. Am I understanding this correctly?
Thank you in advance.
2006-01-03 22:26, By: Jeff, IP: [198.36.32.45]

L2: Allowable interest rate and beneficiaryHello Jeff:
You have mis-interpreted my response above. When designing a SEPP plan there are really only two alternatives:
1. Calculate the annual SEPP distribution once and only once & then distribute the same amount of $$$ every year irrespective of the performance of the underlying assets.
2. Annually recalculate the amount to be distributed thus the amounts distributed do vary every year. These plans require that all three variables be updated — IRA balance, interest rate and life exepctancy. In this context, the interest rate does change every year but must change consistently year-to-year; e.g. if you elected to use 120% of the MT/AFR in year 1 then 120% of MT/AFR must be used in year 2 and so forth.
TheBadger
wjstecker@wispertel.net
2006-01-04 07:09, By: TheBadger, IP: [66.250.23.25]

L2: Allowable interest rate and beneficiaryHi JR:
Let me expand … with emphasis … on Gus’s comment about beneficiaries.
Item 1: Beneficiary designations and future changes are mutually exclusive of 72(t) rules. Changing beneficiaries will not affect a SEPP Plan.
Item 2: As fast as you can, preferably before you eat your next meal, process a Change of Beneficiary form with your IRA custodian. I don’t know, and really don’t want to know, your family situation, but unless there are extenuating circumstances you should list your Spouse as Primary Beneficiary, then Children as Contingent Beneficiaries. If any children have not reached the age of Majority per the laws of your state, then you should add a special notation. This notation will address any minority status and designate some responsible adult to be Custodian of any distributions under the Uniform Transfer to Minors Act (UTMA) of your state. Contact your IRA custodian or Financial Advisor to make these changes. Don’t contact me as I’m not an attorney, just passing on knowledge I have learned in dealing with clients in this situation.
If the first person you talk with gives you the blank stare, start asking for someone within the company with the proper legal knowledge. Mutual fund and Variable Annuity companies have Advanced Marketing personnel, usually containing some good tax attorneys, who can assist with this matter.
You have two hours till lunch on the East Coast so get cracking!
Jim2006-01-04 09:18, By: Jim, IP: [70.184.1.35]

L2: Allowable interest rate and beneficiaryThanks for all the good info. It crystal clear now. JR2006-01-04 18:16, By: JR, IP: [207.200.116.6]