The IRA Beneficiary's Handbook

A Guide to Maximizing the Value

of Your Inherited Retirement Plan

It is important to read this guide BEFORE youdo anything with an IRA or other such planowned by someone who recently died.

Prepared by:

The Fleisher Patterson Law Firm

Wells Fargo Bank Building

3333 S. Bannock St., Suite 900

Englewood, CO 80110

303-488-9888

Webs ite: Fleisher Patter sonLaw. com

® 2018

The IRA Beneficiary's Handbook

If you are named as the beneficiary on an Individual Retirement Account ("IRA")or other qualified retirement plan, you can, of course, withdraw the fundsimmediately upon the death of the owner, but there may be many reasons for notdoing so. This guide is intended to help you get the most benefit from yourinherited IRA, 401(k), or other such plan.

This guide may seem long, but it covers many common and not so commonsituations. Often, a question that seems relatively simple requires a lengthy, fact-specific answer. You will probably need only 25% of this guide, but we don'tknow in advance which 25% will be most relevant to you. Arm yourself with thisinformation and the options available. Learn what you can and cannot do,understand the tax ramifications of each option, and which actions may produceirrevocable adverse tax consequences.

We urge you to work with your investment advisor because integrating inheritedIRA planning into your own planning often provides the best results. Nevertheless,we have included the IRS withdrawal tables as Exhibit A and Exhibit B.

Why we Wrote This Guide: We wrote this guide to help you get the most benefitout of your inherited IRA. A properly-managed inherited IRA can actually giveyou a paycheck for life and even help fund your own retirement. As thebeneficiary, you are in complete control. You can decide when to takedistributions, you can decide what to invest in, and you can name the beneficiaryto receive the funds upon your death. You can even move the inherited IRA toanother investment firm.

As an estate planning attorney, we often meet with my deceased client's familiesseveral weeks after my client has died. Frequently the IRA beneficiaries havealready made irrevocable actions that will cost them thousands, or even tens ofthousands of dollars. These actions are often based upon impulse, or their owninsufficient research, or their well-intended but not fully informed advisors.

Example 1: When Gary's father died, Gary's mother was properly advised to rollhis IRA into hers. When Gary's mother died several years later, Gary rolled herIRA into his IRA. That seemed logical, but the tax law only allows the originalplan owner or his or her surviving spouse to make such a roll-over.

The IRS treated Gary's action not only as liquidation of his mother's IRA, but alsoas an illegal contribution to his own IRA. Gary lost over 50% of the original valueof the IRA in taxes and penalties shortly after his mother died.

Example 2: Susan, a young widow, followed her financial advisor's advice and,like Gary's mother above, rolled her deceased husband's IRA over into hers.Because she needed some of the IRA funds to live on, those withdrawals prior toher attaining 59 1/2 years of age were subject to a 10% tax penalty. With properfmancial advice, Susan could have treated all or a portion of her husband's IRAas an inherited IRA and avoided that 10% penalty.

Example 3: Allen named his living trust as the beneficiary of his $100,000 IRA.Following Allen's death in November, his son, Fred, the Trustee of the trust,withdrew the IRA funds in December. Fred distributed all trust assets to himselfand his two siblings in the following April. As a result of these actions, the IRAwithdrawals were taxed to the trust at 37%. The IRS held Fred as Trustee liablefor the entire tax bill. Fred's siblings had already spent the money ("You made themistake, so you pay the tax!"). So Fred had to pay the entire tax out of his owninheritance. Had the distribution been made more timely, the IRA withdrawalscould have been taxed directly to the beneficiaries, and perhaps taxed at muchlower rates. For instance, if the beneficiaries had been in the 15% tax bracket,their tax would have totaled only $15,000 rather than 37% - saving over $20,000in taxes. Moreover, other options to defer the tax consequences were lost andfamily relationships were destroyed.

Hopefully, by reading this guide and seeking professional help, you will be ableto avoid these and the many other possible mistakes which result in adverse taxconsequences when making decisions regarding your inherited IRA. There is a lotof misinformation or incomplete information out there, as well as commission-driven fmancial "advisors" ("salesmen" might be a better word) who may give youadvice based upon their best interests and not yours.

Don't be afraid to seek independent financial or legal advice. Ask for advice, butevaluate such advice with the help of this guide.

IRAs are one of the few remaining tax shelters. Traditional IRAs offer significanttax deferred investing; Roth IRAs offer tax-FREE investing. Every time you makea withdrawal, you lose part of that tax shelter.

CAUTION: Except for a beneficiary who is the plan owner's surviving spouse(discussed later), an inherited IRA must remain titled in the decedent's name to

avoid immediate taxation. Example: John died with his daughter Susie named asthe beneficiary. Correct titling: John Doe, Deceased, Susie Doe, beneficiary.

As mentioned above, Gary CANNOT transfer the balance of the inherited IRA intohis own IRA. Such a withdrawal from his father's Traditional IRA would triggerimmediate taxation of the amount withdrawn. Had his father's IRA been a Roth

IRA, there would be no taxable income, but Gary would have lost the advantageof tax-free investing for decades. Once withdrawn from the decedent's IRA, suchdistribution cannot be returned to the decedent's IRA. Furthermore, as mentionedbefore, the transfer into his IRA would also constitute an ineligible contributionto his own IRA. There is a 6% penalty on such contributions (and the earningsthereon) which remain in the IRA at the end of each calendar year.

Similarly, although being the beneficiary of a deceased person's IRA does notaffect your own ability to contribute to your own IRA, you as beneficiary cannotmake additional contributions to an inherited IRA. You can, however, consolidate(and also split into separate accounts) inherited IRAs from the same decedent, butonly Traditional IRAs with Traditional IRAs and Roth IRAs with Roth IRAs.

The Greatest IRA Advantage may be...: A very wise tax expert was onceasked, "What is the greatest single advantage of an IRA?" Listeners wereexpecting him to comment on the deductibility of contributions, or the tax deferredgrowth, or the tax free income from a Roth.

His answer surprised his listeners: "The greatest advantage for most plan ownersis that it restricts the plan owner from spending those assets. Unlike regularsavings accounts, the IRA has economic disincentives to withdrawing those fiindsand spending them.

As a result, and even without any earnings or tax benefits, an IRA owner wouldtypically end up with far more savings upon reaching retirement age than thosewho do not participate in such plans."

To some extent, the same is true of your inherited IRA, 401 (k) or other such plan.As a beneficiary of a retirement plan, if you withdraw only the required minimumamounts annually, your inherited IRA can actually fund a major portion ofyour own retirement. The disincentive to withdrawal is immediate taxation and

loss of deferral, or, in the case of a Roth IRA, the loss of tax-free investing.

Different Types of Plans: The IRA concepts discussed in this guide alsogenerally apply to 401(K), 403(b), and other such retirement plans. These plannames are derived from the section of the Internal Revenue Code which authorizes

their creation. Although the plans are somewhat different, we will refer to all suchplans as "plans" or "IRAs" in this guide unless otherwise distinguished. Because401(k) plans can now be transferred to an IRA, we will use the term IRA to referto most such qualified retirement plans.

The "plan owner" is the person who originally created the retirement plan. The"beneficiary" is the person who is actually named on the beneficiary form on filewith the IRA custodian and who inherits the plan on the plan owner's death. The"custodian" (or trustee) is the firm which holds the plan investments - usually afinancial institution such as a bank or brokerage firm.

Pensions, sometimes referred to as "defined benefit plans" usually terminate at thedeath of the plan owner or the plan owner's spouse. This guide may - or may not,depending on the plan - also apply to such plans if there is a residuary lump sumbenefit after the plan owner's death.

Not controlled by Will: The plan owner's will does not control the disposition ofthe plan owner's IRA unless the estate is the beneficiary (usually not advisable.)The IRA custodian is required to pay to the named beneficiary regardless of whatthe plan owner's will says. The beneficiary under Ken's will is his son, but thebeneficiary named on the form on file with the custodian is his daughter. The IRAwill be paid to the daughter.

Traditional IRAs generally are funded by the plan owner with tax deductibledollars, and withdrawals are taxed as ordinary income. Roth IRAs are generallyfunded with after tax dollars (that is, the tax has already been paid on thecontribution), and withdrawals are generally income tax free - including anyearnings or growth in value. Similar plans (Traditional or Roth) may be availablefrom the plan owner's employer in the form of a 401(k) or other such plan.

Liquidation of a Traditional (taxable) IRA will cause the entire amount withdrawn

from the IRA to be subject to immediate taxation, possibly pushing the beneficiaryinto higher tax brackets, and reducing the amount left for investment purposes. Alarge IRA could lose 45% or more in federal and state income taxes; but if

withdrawn over a number of years by a taxpayer in a low tax bracket, such

withdrawals may be taxed at only 15% to 20%.

But, you say, a Roth IRA can be withdrawn tax free. Why not withdraw thebalance immediately? By leaving the funds in the Roth IRA as long as possible,the earnings inside the IRA can also be withdrawn tax free later. If the balance iswithdrawn and then invested, the earnings will be taxable each year.

Stretching out an IRA: "Stretching out an IRA" means withdrawing the balanceof an inherited IRA gradually over a number of years or even over your life

expectancy. However, if an entity such as an estate or trust is the beneficiary onfile with the IRA custodian, the period of withdrawal may be much shorter, even

though you are the beneficiary of the estate or trust. Even then, some deferral

(stretch out) over several years may be available.

One Year Deferral: Even deferring liquidation for one year can result insignificant tax savings.

Example: Mary died in early January and named her son David as beneficiary ofher $1,000,000 traditional IRA. If David immediately liquidated the IRA, the taxbite would be $400,000 assuming a 40% combined federal and state income taxrate. Assuming the remaining $600,000 earned 3.6% after tax (6% pre-tax at thesame 40% tax rate), or $21,600, her son would have $621,600 at the end of one

year.

But what if instead David had waited one year to liquidate the IRA. The full $1million would have earned 6% tax deferred, or $60,000. Upon liquidation one yearlater, the tax on the $1,060,000 would be the same 40%, or $424,000, leavingDavid with $636,000 after tax, or $14,400 more than if he liquidated the IRAimmediately after his mother's death!

Life Expectancy Deferral: The difference grows as the deferral period islengthened. Yes, there are minimum required distributions starting in the yearfollowing the plan owner's death, but by pulling out the minimum amount, theowner of even a $100,000 IRA can realize substantially greater benefits.

In Exhibit C (a traditional IRA) and Exhibit D (a Roth IRA) we assumed (1) a$100,000 IRA, (2) an earnings rate of 6%, (3) a regular annual tax bracket of30%, and (4) a first year tax bracket for a complete withdrawal of 40% becauseof the higher tax brackets.

On the left side of the page, we assumed that the IRA inheritor withdrew and spent(after tax) the required minimum distribution. On the right side of the page, weassumed that the inheritor liquidated the entire IRA in the first year, then investedthe balance at the same rate, and withdrew from the investment account the same

amount, after tax, as the inheritors after tax withdrawal in the left column.

Exhibit C demonstrates the advantages to the beneficiary of a Traditional IRAof withdrawing only the required minimum distribution each year. The left side ofthe page shows the after tax withdrawals from the IRA over the beneficiary's lifeexpectancy; the right side shows a likely scenario if the beneficiary were toliquidate the IRA, pay tax on the withdrawal, invest the remainder at the same

rate, and then spend it at the same dollar rate as the beneficiary who stretched outthe IRA withdrawals over his or her life expectancy as shown on the left side ofthe page.

By stretching out the IRA withdrawals on this $100,000 Traditional IRA, the

beneficiary will, AFTER TAX, actually have over $220,000 more to spend fromhis or her IRA. This exhibit demonstrates the advantage of compounded taxdeferral.

Exhibit D demonstrates advantages to the beneficiary with a Roth IRA. Theanalysis assumes all IRA withdrawals are income tax free. The beneficiary whostretches out his withdrawals actually has over $260,000 more to spend after taxesthan the beneficiary who liquidates his inherited Roth IRA in the first year. Thisexhibit demonstrates the advantage of compounded tax-free investing.

Taxation of Retirement Plans: "Traditional Plans" are generally funded with taxdeductible contributions (or rollovers from other plans, such as 401(k)s, whichwere tax deductible). To the extent funded with "pre-tax dollars", all planwithdrawals are fully taxable as ordinary income in the year withdrawn. Suchwithdrawals are taxable whether withdrawn by the plan owner or by thebeneficiary. The tax concept of "step up in basis" (or basis adjustment) on theplan owner's death does not apply to retirement plans.

Occasionally, a traditional plan may contain some "after tax" dollars. This usuallyoccurs when a plan contribution has been made for which no tax deduction was

allowed, perhaps because the plan owner's spouse participates in a qualified planat his or her work. Rather than making such a contribution to a Traditional IRA,the plan owner today should, if eligible, consider making such contribution to aRoth IRA instead as discussed below.

"Roth Plans" are generally funded with non-deductible dollars, and planwithdrawals are generally income tax free. The gains in a Roth plan are generallytaxed only if withdrawn by the plan owner or beneficiary within five years afterthe first day of the calendar year in which the first contribution was made to anyRoth plan. Even then, such withdrawals are taxable only to the extent of gain invalue.

Traditional IRA Withdrawals are treated as a pro-rata withdrawal of both thedeductible and non-deductible portions in all such plan accounts taken together,even if only withdrawn from only one account.

Roth Plan Withdrawals, however, are treated as first coming from the non-deductible contributions (in effect, a return of principal), and only thereafter fromthe gain, which, if withdrawn five years after the first of the year in which the firstcontribution was made to any Roth IRA, would then be income tax free.

The 10% Penalty: With certain exceptions, there is a 10% penalty on earlywithdrawals from an IRA by the plan owner if the plan owner is under 59 1/2years of age. This penalty does not apply to a beneficiary of an inherited IRAafter the plan owner's death, even if such beneficiary is under 59 1/2 years of age.(Exception: See surviving spouse roll-overs discussed below.)

Required Withdrawals by Plan Owner: Although plan funds can generallyaccumulate tax deferred almost indefinitely in most retirement plans (and tax-freein a Roth IRA), the plan owner of a Traditional Plan is required to make certainminimum withdrawals in the year the plan owner becomes 70 1/2 years of age andeach year thereafter. There are no required minimum distributions during the planowner's lifetime for Roth plans.

The first distribution must be taken either by December 31 of that calendar year,or by April 1 of the next calendar year. Thereafter, each distribution must betaken by December 31 of that year. Those who postpone the first distribution intothe next calendar year will end up having two required distributions in that year.

There is a 50% IRS penalty on the amount which was required to be withdrawnbut was not withdrawn. Accordingly, if you fail to make a required $100withdrawal fro a traditional IRA, the penalty would be $50, but the full $100would be taxable to you because tax penalties are not deductible.

There are two important withdrawal tables which are included with this guide. Thefirst table (Exhibit A) shows the divisor for the plan owner. Thus, for a planowner who has or will become 75 years of age this year, the divisor is 22.9. Theaccount value as of December 31 of the previous calendar year is divided by thisnumber to calculate the required minimum distribution ("RMD") for the currentyear. The plan owner uses the divisor listed for 76 years of age, which is 22.0,for the next calendar year's calculation.

There is a separate table in IRS Publication 590 for plan owners whose spouses aremore than ten years younger than the plan owner.

If you withdraw more than the required minimum distribution in one year, thatexcess cannot be used to offset the required minimum distribution in any followingyears.

Required Withdrawals by Beneficiaries: On the plan owner's death, therequired minimum distribution (if any) for the plan owner must be withdrawn inthat calendar year to the extent that it has not been withdrawn prior to his death.

In the following calendar years, the beneficiary of both Traditional and Roth plansare required to make certain minimum distributions calculated based upon the tablein Exhibit B. The 50% penalty applies to the extent that the required distributionis not withdrawn in that calendar year.

This table is used differently than the plan owner's table. Whereas the plan ownergoes back to the table each year, the non-spousal/beneficiary uses this table onlyonce, and that is to determine the first year's divisor. That first year divisor isbased upon the age which the beneficiary will become in the year following thecalendar year of the plan owner's death. For example, if the beneficiary willbecome 40 years of age in the calendar year following the plan owner's death, thedivisor will be 43.6.

Once the divisor is determined for the beneficiary, each year thereafter 1.0 issubtracted from that initial divisor. The beneficiary does not go back to the tableagain. In the above example, the divisor to be used in the second year followingthe plan owner's death would be 42.6, and would be 41.6 for the third year.

Exception: If the Plan Owner is younger than the beneficiary, the beneficiary isallowed to use the table in Exhibit B based upon the plan owner's age in the yearof death, and reduce that number by 1.0 in each following year. Example: Patrickhad already turned 43 in the year he died, and he left his IRA to his 73 year oldfather. Patrick's life expectancy in the IRS table at age 43 is 40.7 years - SeeExhibit B). His father's first required distribution from Patrick's IRA is in the yearfollowing Patrick's death, and the divisor would be 39.7 (40.7 less 1.0) of theyear-end IRA value in Patrick's year of death.

It is your responsibility to calculate and to withdraw the required distribution eachyear. Don't rely entirely on the advice of others.

If there is a failure to make the required minimum distribution by either the planowner or the beneficiary, the taxpayer can request that the IRS waive the 50%penalty on IRS form 5329.

There must be "reasonable cause" AND the withdrawal must be made as soon asthe error is noticed. Reasonable cause is more than just not knowing of orforgetting about the required withdrawal. One reason the IRS has accepted withregularity is if death of the plan owner occurs near the end of the year, and if therequired amount is withdrawn early in the next year.

If as a non-spousal beneficiary you miss taking the required distribution in a timelymanner, you can still avoid the 50% penalty by electing the five year rule: Youmust withdraw the entire IRA before the end of the fifth year following the yearof the plan owner's death.

Having an inherited IRA does not affect your rights and obligations with respectto your own IRA which you own as the original plan owner. For instance, as a 65year old beneficiary you will have required distributed from your inherited IRAthe year after the original plan owner dies, but with respect to your own IRA, yourrequired distributions don't start until the year in which you become 70 1/2 yearsof age.

You cannot satisfy any required distributions from your inherited IRA withdistributions from your own IRA, and vice versa. If you inherited IRAs from bothyour mother and your father, they must be kept separate, and required distributionson your mother's IRA cannot be satisfied by distributions from your father's IRA,and vice versa. If you inherited both a traditional IRA and a Roth IRA from yourfather, you cannot satisfy the required distributions from your father's traditionalIRA with withdrawals from your father's Roth IRA, and vice versa.

Warning #1: Don't Submit Forms On-line: It's OK to obtain the forms on-lineand print them out to study and complete before mailing them in. You may wishto discuss them with your financial advisor or attorney. If you try to completethem on-line, you may be one click away from a disaster!

Waning #2: 401(k) Plans: Many 401(k) plans require that upon death of theemployee that the balance be withdrawn from the account within five years. Thisplan requirement does not prohibit you as the beneficiary from transferring thebalance to an inherited IRA (or create one for that purpose.) Several years ago theIRS issued regulations that now require 401(k) administrators to offer this option.Learn your rights and question what others tell you.

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What if There is more than One Beneficiary? For the purposes of determiningthe required minimum distributions, IRA beneficiaries are determined as of

September 30 of the calendar year following the death of the plan owner.Assuming that all of the beneficiaries as of that date are individuals (NOT trusts,estates, charities, or other non-living entities), the beneficiaries are required to usethe life expectancy of the oldest such beneficiary.

If a named beneficiary disclaims his interest, or fully liquidates such share beforethat date, such beneficiary will not be treated as a beneficiary for the purposes ofcalculating the required minimum distribution. But if the beneficiary dies beforesuch date, such deceased beneficiary will still be considered as being a beneficiaryfor determining the life expectancy of the oldest beneficiary as of that September30 date.

However, under the Separate Share Rule, if by December 31 of the calendar yearfollowing the plan owner's death, the IRA is divided into separate inherited IRAsfor each beneficiary, then each beneficiary can then use his or her own lifeexpectancy. Such division also gives each beneficiary the right to make his or herown investment and withdrawal decisions, and name who will inherit that share of

the IRA upon that beneficiary's death.

Example of Separate Share Rule: John and Judy are the beneficiaries of theirdeceased father's IRA. They timely divide the IRA into two separate inheritedIRAs. John may decide to invest his inherited IRA in stocks and perhaps makelarger withdrawals in a year he is unemployed. Judy can make entirely separateinvestment and withdrawal decisions than John, and each has their own privacy asneither has access to the other's account. Furthermore, each beneficiary can namethe person or persons who will be entitled to such beneficiary's inherited IRA uponsuch beneficiary's death.

What if one of the Beneficiaries is not an Individual? If a beneficiary, such asa charity, withdraws its share before that September 30 date, that beneficiary willbe disregarded. But if the charity (or estate or other entity) is still a beneficiary onthat date, then ALL beneficiaries are required to calculate their required minimumdistributions based under the five year/life expectancy rule.

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The Five Year/Life Expectancy Rule: Unless all of the named beneficiaries onthe IRA custodian's beneficiary form are individuals (people, not entities) as ofSeptember 30 of the year following the plan owner's death, the following ruleapplies:

If the plan owner died before April 1 of the year following the year in which theplan owner attains 70 1/2 years of age, then the IRA must be completelywithdrawn by the end of the fifth year following the plan owner's death.

If the plan owner dies on or after such date, then each beneficiary is required touse the plan owner's life expectancy as indicated in the "beneficiary" table (ExhibitB), and deduct 1.0 each year thereafter.

Can the Beneficiary of an Inherited IRA name his or her own Beneficiary toinherit later on? Yes, but on the death of the first beneficiary, the secondbeneficiary still must use the required minimum distribution withdrawal rateapplicable to the first beneficiary. Example: John inherits his father's IRA, nameshis daughter (or older uncle) as the beneficiary, and later dies. That secondbeneficiary is required to use John's life expectancy in calculating the requiredminimum distributions each year.

Surviving Spouse Options: There are additional options and provisions availableto a surviving spouse, the most common of which is to treat the IRA as his or herown IRA, at which time the surviving spouse becomes the "plan owner" asdescribed above. This can be accomplished by transferring the balance to his orher own IRA (Note: only a surviving spouse can do this!), or by retitling theexisting IRA in the spousal/beneficiary's name.

A 401(k) plan can be transferred directly to a surviving spouse's IRA or an IRAcreated for that purpose. Traditional Plans can only be transferred to the survivingspouse's Traditional IRA, and Roths to Roths.

Unlike non-spousal beneficiaries, a spouse can also do a rollover under which thespouse receives a check and then deposits up to the same amount of the check intohis or her own IRA within 60 days. The amount so deposited is eligible for rollover status, and is not taxed in the year the initial check was received. If notdeposited, it's a taxable withdrawal.

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The 60 Day Rule is strictly enforced by the IRS with only a few exceptions. If nottimely deposited into the spouse's IRA, the withdrawn amount becomes taxableincome in the year of withdrawal, and is not eligible to be deposited in thebeneficiary's IRA.

Another potential problem with the 60 day roll-over is that you are only allowed

one such roll-over in any consecutive twelve month period.

Accordingly, attempting a 60 day rollover of the amount withdrawn is risky and

is strongly discouraged. The usual recommendation is to do a custodian tocustodian transfer to avoid any possibility of violating the 60 day rule. There isnever a check issued payable just to you. But in case you as a surviving spouse

have already received a check, you should be aware of this 60 day rule.

An amount not to exceed the amount withdrawn by check from the plan owner'sTraditional IRA must be timely deposited to the surviving spouse's Traditional IRA(or one created for that purpose), and a Roth withdrawal must be timely deposited

to the spouse's Roth IRA to retain its tax free status.

Other actions taken (or not taken) may cause the IRA to be treated as the surviving

spouse's IRA. The failure of the surviving spouse to take a required minimumdistribution, or the surviving spouse contributing to the IRA, will each cause theIRS to treat the IRA as having been transferred to the surviving spouse's IRA.

Once transferred into his or her own IRA, the spousal/beneficiary is then treated

as the plan owner, and the usual plan owner requirements apply. For instance, thespouse uses the plan owner's table (Exhibit A) to compute the annual requireddistribution based upon that surviving spouse's age. The required distribution isalmost always lower as a plan owner than as a IRA inheritor if the deceasedspouse was over 70 1/2 on his date of death.

But as a plan owner the 10% penalty would usually apply if the surviving spousemakes withdrawals prior to such spousal/beneficiary attaining 59 1/2 years of age.If the decedent's IRA was a Roth IRA, then if the surviving spouse treats it as hisor her own, there would be no required minimum distributions during that

surviving spouse's lifetime.

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A Young Surviving Spouse? If the surviving spouse/beneficiary is under 59 yearsof age, and it appears that he or she may need to make withdrawals from thetraditional IRA to live on prior to attaining 59 1/2 years of age, suchspousal/beneficiary may wish to consider treating the IRA as an inherited IRA toavoid such 10% penalty.

The regulations provide that a surviving spouse/beneficiary can treat an IRA as his

or hers at any time. Therefore, upon attaining 59 1/2 years of age, the survivingspouse can then roll any remaining IRA balance into his or her own IRA.

If the Deceased Spouse has not yet attained 70 1/2 years of age: A survivingspouse can always treat the IRA as an inherited IRA. As a surviving

spouse/beneficiary of an inherited IRA, distributions are not required until the endof the year in which the deceased spouse would have attained 70 1/2 years of age.

Also, the required minimum distribution is calculated differently than for a non-spousal inherited IRA beneficiary. Required minimum distributions are calculatedby going back to the Uniform Lifetime table (Exhibit A) each year and using the

factor based upon the surviving spouse attained age in that year.

Usually, but not always, it is advantageous to treat the inherited IRA as the

surviving spouse's own at that time. One of the reasons for this is if the survivingspouse dies having an inherited IRA, that surviving spouse's beneficiaries (the

children?) are required to use the surviving spouse's life expectancy in calculatingtheir required minimum distributions.

If the surviving spouse had treated the IRA as his or her own, then the children

could use their life expectancies in calculating their required minimumdistributions.

Example: Harry is age 72 when his wife, age 65, dies. If Harry treats the IRA ashis own, then required minimum distributions on that IRA will commence in thefollowing year based upon his life expectancy. But if Harry treats it as an inheritedIRA, then the required minimum distributions would not begin until about five

years later, at which time Harry could then treat the IRA as his own and calculate

the required distributions based upon his life expectancy using the plan owner'stable.

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If Harry dies after such conversion, then the beneficiaries may be able to use theirown life expectancies, and not Harry's life expectancy, in calculating the requiredminimum distributions.

What if the Beneficiary is an Estate? This can occur in a number of situations:(1) the plan owner failed to name a beneficiary, which under most plans defaultsto the plan owner's estate; (2) the plan owner actually named "My Estate" as abeneficiary; or (3) there is no surviving named beneficiary (example: John namedhis wife and no contingent beneficiary, and his wife predeceased him.)

If the estate is the beneficiary, then the IRA must be withdrawn under the 5year/life expectancy rule discussed above. Many executors of estates typically wantto close out the estate as soon as possible, and might withdraw the IRA evenfaster.

Unless the IRA is quite small, the executor might wish to at least considerwithdrawing one-half shortly after the plan owner's death, and the remaining halfin the first month of the following taxable year (usually January, although an estatecan elect any month as the end of its tax year.)

There is one exception: In several private letter rulings, the IRS has permitted asurviving spouse to roll over distributions from an IRA payable to the owner'sestate, because the surviving spouse was the executor and only beneficiary with

total control over the funds and their disposition. The IRA is liquidated into theestate, a check is issued by the estate to the surviving spouse, who then depositsit to that surviving spouse's IRA, all within 60 days.

What if the IRA Beneficiary is a Trust: The general rule is that a trust is treatedas an estate, as neither a trust nor an estate can be treated as an individual

beneficiary. That means the five year/life expectancy rule applies.

However, the beneficiaries of a trust will be treated as the individual beneficiaries

(and not the trust) for purposes of determining required minimum distributions

after the plan owner's death if all of the following are true:

The trust is a valid trust under state law, or would be but for the fact

that there is no corpus.

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The trust is irrevocable or became, by its terms, irrevocable upon theowner's death.

The beneficiaries of the trust who are beneficiaries with respect to thetrust s interest in the owner's benefit are identifiable from the trustinstrument.

The trustee of the trust provides the IRA custodian or trustee with thedocumentation required by that custodian or trustee.

The trustee of the trust should contact the IRA custodian or trustee for details onthe documentation required for a specific plan, which is typically a copy of thetrust as well as information regarding the individual beneficiaries. The deadline forthe trustee to provide the beneficiary documentation to the IRA custodian or trusteeis October 31 of the year following the year of the owner's death.

Even then, the required minimum distribution is calculated based upon the lifeexpectancy of the oldest trust beneficiary. If the trust names your children andyour father as beneficiaries, the trust will be required to use your father's lifeexpectancy.

The separate share rule, discussed earlier, cannot be used by beneficiaries of atrust in calculating the required minimum distributions, even though the IRSpermits the IRA to be divided into separate shares for each trust beneficiary. Ineffect, all trust beneficiaries will have their required minimum distributions basedupon your father's life expectancy.

For that reason, we seldom recommend that a trust be named as a beneficiary,though sometimes we will recommend that the separate shares for each beneficiarybe named as discussed below.

What if a Trust Beneficiary is Another Trust? If the beneficiary of the trust(which is the beneficiary of the IRA) is another trust and both trusts meet theabove requirements, the beneficiaries of the other trust will also be treated as oneof the "designated beneficiaries" for purposes of determining the distributionperiod.

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For example, under her father's living trust, the trust share for Sara is not to bedistributed outright to her, but is to be held in trust until she is 30 years of age.On September 30 of the calendar year following the plan owner's death, Sara is28 years of age.

If the contingent beneficiary (that is, if Sara were to die on that September 30date) is her 60 year old uncle, then both Sara and the uncle will be treated as trustbeneficiaries for the purposes of determining the beneficiary with the shortest lifeexpectancy. In this situation, the IRA payable to the trust would have to bewithdrawn based upon the uncle's life expectancy and not Sara's life expectancy.

But if the contingent beneficiary were the American Cancer Society, then thatentity would be treated as one of the beneficiaries, and, because it is an entity, theIRA which is payable to the trust would have to be liquidated under the 5 year/lifeexpectancy rule discussed above. This result would negatively affect not only thetrust share for Sara, but would also affect the shares of the other trust beneficiaries

whose shares may be distributed outright to them and not held in trust.

The Conduit Trust: There is an exception for a "pass-through trust", sometimescalled a "conduit trust." Assume in the above example that Sara's trust share statedthat any IRA withdrawals were required to be immediately distributed to Sara andnot accumulated in the trust. If her trust share contained that provision, then thecontingent beneficiary (The American Cancer Society) could be ignored. Note thata trust requirement to "distribute all of the trust income to Sara" is NOT the same

as requiring all IRA withdrawals to be distributed. This is because trust law does

not treat all TAXABLE income as trust income.

For instance, IRA withdrawals or cash flow from depleting resources, such as oiland gas, are often treated as 10% income, 90% principal for trust accountingpurposes under state law. So even if all of the taxable income is distributed to

Sara, the IRS requirement is not met because such distribution is not mandated bythe controlling document (the trust).

What if the Separate Trust Shares are actually named on the BeneficiaryDesignation Form on file with the IRA Custodian? If the individual sharesunder the trust are named, then each share is treated separately, thus perhapsavoiding accelerated distributions caused by an older beneficiary.

17

For example, assume the IRA custodian's beneficiary designation read 50% to thetrust share for my son George under the Jones Trust, and 50% to the trust sharefor the benefit of George's daughter Leslie under the Jones Trust. Assume bothshares either require outright distribution, or if held in trust contain the conduitprovision discussed above. The trust share for the benefit of Leslie could be

withdrawn based upon Leslie's life expectancy and George's share based upon hislife expectancy.

But if Leslie's share is to be held in trust without those conduit provisions, thenthe life expectancy of the contingent beneficiary would have to be considered incalculating the required minimum distributions with respect to her trust's share ofthe IRA. For example, if the contingent beneficiary were her older brotherGeorge, then her share of the IRA would have to use his life expectancy; if thecontingent beneficiary were the American Cancer Society, then her share of theIRA would have to be withdrawn under the 5 year/life expectancy rule. Butbecause the separate trust shares were actually named as the IRA beneficiaries, thecontingent beneficiary of her share would not be used in calculating the requiredminimum distributions for George's share.

If a Trust or Estate is the named as the IRA beneficiary, you may want to contacta knowledgeable tax advisor to comply with this complicated area of the tax law.

Will the IRA be taxed in the Estate or the Trust, or to the Estate or TrustBeneficiaries?: Taxation of trusts and estates is complex, but here are a few of thegeneral principles. Withdrawals from a Traditional IRA by an estate or trust willbe reported on the estate or trust tax return (IRS Form 1041) as income. Taxableincome, to the extent of distributions made during the taxable year, are taxed tothe distributees (the beneficiaries), and the estate or trust receives a deduction fromits taxable income on its income tax return.

The trust or estate files an IRS Form 1041 with a Schedule K-1 for each

beneficiary. K-ls are similar to Form 1099's, are furnished to the IRS and thebeneficiary, and require the beneficiary to report that share of taxable income onthat beneficiary's own tax remrn. To the extent not distributed to the beneficiaries,the taxable income is likely to be taxed at higher rates than the beneficiaries'marginal tax rates. The top tax bracket for trusts and estates is 37% and appliesto income over approximately $12,500 (2018).

18

Beneficiaries are subject to that highest income tax rate only if their incomeexceeds $400,000. The 3.8% ObamaCare investment income tax does not applyto IRA withdrawals, but may cause other income in the trust or of the beneficiaryto be subject to that tax.

A trust or estate can elect to have any distributions made during the first 65 daysof the year treated as having been made in the prior tax year. Beneficiaries shouldbe aware that although estate distributions are generally income tax free, that is nottrue to the extent of income received from IRAs, deferred annuities, and U.S.savings bond interest that has accrued. Accordingly, beneficiaries should considerthe need to make quarterly estimated income tax payments to avoid IRS and statepenalties for under withholding.

Example: The estate elects a calendar year as its fiscal year. The executorliquidates a $200,000 Traditional IRA in December, 2018, but does not make anydistributions to the beneficiaries until March 15, 2019. The $200,000 IRA is taxedto the trust almost entirely at 37% in 2018, assuming no other estate distributionshad been made to beneficiaries in 2018.

Had the IRA been liquidated in January of 2019, instead of December of 2018, theIRA would have been taxable to the beneficiaries at their individual tax rates -probably at 12% to 22%, potentially saving $40,000 or more in income taxes.

Worse yet, assume that the IRA was the only asset of the estate. When theexecutor prepares the 2018 tax return, he discovers that the estate owes

approximately $80,000 in taxes, but the executor has no money left in the estate.The executor is personally liable to the IRS for this tax, and may have greatdifficulty in getting the beneficiaries to return their portion of the taxes payable.

As you can see, when a trust or estate is the named beneficiary, both thecalculation of the required minimum distributions and the taxation are quitecomplex, and it is suggested that competent legal and tax advice be sought. Also,you might find IRA Publications 590 (on IRAs) and Publication 559 (for Survivorsand Executors) helpful, but unfortunately these publications do not alwaysincorporate the many private letter rulings and other IRS regulations and courtdecisions involving this area of the tax law.

19

Wait to complete your tax return: If a trust or estate is the named beneficiaryof the IRA, then you are a beneficiary of the trust or estate, you should be awarethat you usually are unable to complete your own individual tax returns until thetrust or estate tax return has been prepared and you receive your Form K-1 asdescribed above. If you file your return in January, and then receive a K-1 in lateMarch, you will likely have to file an amended tax return (and pay the tax due) byApril 15 to avoid a tax penalty.

If the Decedent had a Taxable Estate: IRAs are includible in the taxable estatefor federal estate tax purposes of the deceased plan owner. Once inherited, theyare also includible in the taxable estate of the beneficiary. An IRA beneficiary(even a contingent beneficiary) is entitled to a federal income tax deduction for thefederal estate tax attributable to the inclusion of the IRA in the prior owners'taxable estate, and at the incremental tax rate (40%).

If your decedent's estate was subject to estate taxes, have the accountant providethe necessary information to you to take this deduction as the IRA account iswithdrawn.

Common Law Spouses: Colorado is one of the few states that still recognizescommon law marriages. If the deceased plan owner which names you as abeneficiary may involve a common law marriage situation, you should discuss thataspect with your legal counsel.

Asset Protection: The federal bankruptcy code generally protects IRAs and otherplans if the plan owner files for bankruptcy or, under many state laws, if the planowner is sued. What about inherited IRAs? The U.S. Supreme Court recentlydecided this issue and found that inherited IRAs were not quite like a plan owner'sIRA, and thus are NOT protected from the beneficiary's creditors in bankruptcy.We now strongly recommend that plan owners consider leaving IRAs to assetprotection trusts to protect the beneficiary.

Example: Stacy's father named her as the beneficiary of his IRA. Shortly beforehe died she filed for bankruptcy. The bankruptcy trustee obtained a court orderthat the IRA custodian pay the proceeds to the bankruptcy court. Had Stacy's sharebeen left in an asset protection trust, the IRA could have been protected and usedto help Stacy with her living expenses over a great many years.

20

There is even court precedent that Stacy could serve as trustee of such trust andstill enjoy the asset protection aspect.

If the plan owner is already deceased, it is probably too late to protect yourinherited IRA from your creditors. If you are a beneficiary and the plan owner isstill living, and asset protection may be important to you, consider having the planowner change his estate plan to leave your inheritance, including any IRAs, intrust for your benefit. If the plan owner makes the proper changes to his or herestate plan and beneficiary designations, your inheritance can be protected fromcreditors, predators (divorcing spouses), lawsuits, and the bankruptcy court. Thus,the plan owner can do something for you that you cannot do for yourself.

Conclusion: We hope this guide will assist you in obtaining the greatest valuefrom your inherited IRA and help you avoid some of the costly pitfalls made bymany IRA beneficiaries. Various plans may have specific provisions which differfrom the general principles discussed above. Keep in mind that both tax laws andregulations regarding IRAs change frequently and this guide is not intended to givespecific legal or tax advice. This guide is intended to be just that - A guide to alertyou to the advantages and some of the pitfalls we have observed. As a law firmspecializing in probate and trust administration, we would be pleased to meet withyou to discuss any questions you may have after reading this publication.

•2018

21

EXfflBIT A

The Final Regulations Regarding the Required MinimumDistributions from Retirement Accounts by Plan Owners

The final IRA distribution regulations have greatly simplified the calculation of the requiredminimum distributions. Under these regulations, the owner's required distribution is based uponthe owner's attained age by reference to the table reproduced below. Example: A person whoturns 78 years old during 2008 must use 20.3 as his divisor. If his 12/31/2007 account balancewas $203,000, his required distribution for 2008 would be $10,000. For 2009, he must use 19.5as his division. The only exception: If the plan owner's spouse is the beneficiary and is morethan 10 years younger than the owner, the owner may use the joint life expectancy tables.

Uniform Lifetime Table (For Plan Owners)

Age of employee Distribution period Age of employee Distribution period70 27.4 92 10.2

71 26.5 93 9.6

72 25.6 94 9.1

73 24.7 95 8.6

74 23.8 96 8.1

75 22.9 97 7.6

76 22.0 98 7.1

77 21.2 99 6.7

78 20.3 100 6.3

79 19.5 101 5.9

80 18.7 102 5.5

81 17.9 103 5.2

82 17.1 104 4.9

83 16.3 105 4.5

84 15.5 106 4.2

85 14.8 107 3.9

86 14.1 108 3.7

87 13.4 109 3.4

88 12.7 110 3.1

89 12.0 111 2.9

90 11.4 112 2.6

91 10.8 113 2.4

92 10.2 114 2.1

93 9.6 115+ 1.9

After the death of the plan owner, designated beneficiaries are required to make minimumannual withdrawals based upon their own single life expectancy as indicated in the Table on thereverse.

' 2008 by Stewart W. Fleisher, Attorney at Law, 3333 S. Bannock St., Suite 900, Englewood, CO 80110 (303) 488-9888

EXfflBIT B

The Single Life Expectancy Table - to be used for calculatingRequired Minimum Distributions for Designated Beneficiaries

Upon the death of the plan owner, a "Designated Beneficiary" is permitted to continue the IRAin the decedent's name and withdraw only the required minimum distribution, which iscalculated by dividing the prior year-end account balance by a fraction determined by referenceto the table below. For instance. Dad dies in 2008 with his daughter as beneficiary. In 2009 hisdaughter will turn 48 years of age. In 2009 she must withdraw at least 1/36 of the prior yearaccount balance. In each following year the divisor is reduced by 1; thus, in 2010 she mustwithdraw 1/35. Additional options are available for beneficiaries older than the plan owner andfor surviving spouses.

Single Life Table (For Designated Beneficiaries)

Age Life Age Life Age Life Age LifeExpectancy Expectancy Expectancy Expectancy

0 82.4 29 54.3 58 27.0 87 6.71 81.6 30 53.3 59 26.1 88 6.32 80.6 31 52.4 60 25.2 89 5.93 79.7 32 51.4 61 24.4 90 5.54 78.7 33 50.4 62 23.5 91 5.25 77.7 34 49.4 63 22.7 92 4.96 76.7 35 48.5 64 21.8 93 4.67 75.8 36 47.5 65 21.0 94 4.38 74.8 37 46.5 66 20.2 95 4.19 73.8 38 45.6 67 19.4 96 3.810 72.8 39 44.6 68 18.6 97 3.611 71.8 40 43.6 69 17.8 98 3.412 70.8 41 42.7 70 17.0 99 3.113 69.9 42 41.7 71 16.3 100 2.914 68.9 43 40.7 72 15.5 101 2.715 67.9 44 39.8 73 14.8 102 2.516 66.9 45 38.8 74 14.1 103 2.317 66.0 46 37.9 75 13.4 104 2.118 65.0 47 37.0 76 12.7 105 1.919 64.0 48 36.0 77 12.1 106 1.720 63.0 49 35.1 78 11.4 107 1.521 62.1 50 34.2 79 10.8 108 1.422 61.1 51 33.3 80 10.2 109 1.223 60.1 52 32.3 81 9.7 110 1.124 59.1 53 31.4 82 9.1 111 + 1.025 58.2 54 30.5 83 8.626 57.2 55 29.6 84 8.127 56.2 56 28.7 85 7.628 55.3 57 27.9 86 7.1

' 2008 by Stewart W. Fleisher, Attorney at Law, 3333 S. Bannock St., Suite 900, Englewood, CO 80110 (303) 488-9888

EXfflBIT C

Example of a Stretched Out Traditional IRA vs Immediate Liquidation and InvestmentAssumes both beneficiaries spend the stretch withdrawal amount each year

IRA Value on Death of Owner: 100,000

Assumed Earnings Rate: 6.00%

Age of Beneficiary: 40

Beneficiary's Life Expectancy: 43.6 *

Beneficiary's Incremental Tax Rate: 30.00% *

WiAssu

thdrawal Schedule if Taxes paid in Year Onemed Marginal Tax Rate in Year One: 40.00%

Year Age

40

41

42

43

44

6 45

7 46

8 47

9

10

11

12

25

26

13 52

14 53

15 54

16 55

17 56

18 57

19 58

20 59

21 60

22 61

23 62

24 63

64

65

27 66

28 67

29 68

30 69

31

32

33

34

35

36 75

37 76

38 77

39 78

40 79

41 80

42 81

43 82

44 83

45 84

46 85

47 86

48 87

49 88

50 89

51 90

Divisor

43.6

42.6

41.6

40.6

39.6

38.6

37.6

36.6

35.6

34.6

33.6

32.6

31.6

30.6

29.6

28.6

27.6

26.6

25.6

24.6

23.6

22.6

21.6

20.6

19.6

18.6

17.6

16.6

15.6

14.6

13.6

12.6

11.6

10.6

9.6

8.6

7.6

.6

,6

,6

,6

5

4

3

52

53

54

91

92

93

2.6

1.6

0.6

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Beginning

IRA

Balance

100,000

103,706

107,494

111,360

115,299

119,305

123,373

127,494

131,660

135,861

140.086

144,322

148,555

152,767

156,940

161,055

165.087

169,011

172,797

176,415

179,829

182,999

185,881

188,429

190,587

192,299

193,498

194,114

194,067

193,271

191,629

189,037

185,376

180,518

174,319

166,620

157,243

145,987

132,627

116,901

98,502

77,051

52,039

22,637

0

0

0

0

0

0

0

0

0

0

Plus

Earnings

6, 000

6,222

6,450

6,682

6,918

7,158

7,402

7,650

7, 900

8,152

8,405

8,659

8,913

9,166

9,416

9,663

9, 905

10,141

10,368

10,585

10,790

10,980

11,153

11,306

11,435

11,538

11,610

11,647

11,644

11,596

11,498

11,342

11,123

10,831

10,459

9, 997

9,435

8,759

7,958

7, 014

5, 910

4,623

3,122

1,358

0

0

0

0

0

0

0

0

0

0

Less

Withdrawal

2,294

2,434

2,584

2,743

2,912

3, 091

3,281

3,483

3,698

3, 927

4,169

4,427

4,701

4, 992

5,302

5, 631

5, 981

6,354

6,750

7,171

7, 620

8,097

8,606

9,147

9,724

10,339

10.994

11,694

12,440

13,238

14,090

15,003

15,981

17,030

18,158

19,374

20,690

22,119

23,683

25,413

27,362

29,635

32,524

23.995

0

0

0

0

0

0

0

0

0

0

Ending

Balance

103,706

107,494

111,360

115,299

119,305

123,373

127,494

131,660

135,861

140.086

144,322

148,555

152,767

156,940

161,055

165.087

169,011

172,797

176,415

179,829

182,999

185,881

188,429

190,587

192,299

193,498

194,114

194,067

193,271

191,629

189,037

185,376

180,518

174,319

166,620

157,243

145,987

132,627

116,901

98,502

77,051

52,039

22,637

0

0

0

0

0

0

0

0

0

0

0

Withdrawal

After Tax

1,606

1,704

1,809

1,920

2,038

2,164

2,297

2,438

2,589

2,749

2,918

3,099

3,291

3,495

3,711

3, 942

4,187

4,448

4,725

5,020

5,334

5,668

6,024

6,403

6,807

7,237

7,696

8,186

8,708

9,266

9,863

10,502

11,186

11,921

12,711

13,562

14.483

15.484

16,578

17,789

19,153

20,744

22,767

16,797

0

0

0

0

0

0

0

0

0

0

* Beginning

* Balance

* After tax

* 60,000

* 60,554

* 61,394

* 62,163

* 62,854

* 63,456

* 63,958

* 64,347

* 64,611

* 64,736

* 64,706

* 64,506

* 64,116

* 63,518

* 62,691

* 61,613

* 60,258

* 58,602

* 56,616

* 54,269

* 51,528

* 48,359

* 44,721

* 40,576

* 35,877

* 30,577

* 24,624

* 17,963

* 10,532

* 2,266

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

* 0

Plus

Earnings

3,600

3,633

3,684

3,730

3,771

3,807

3,837

3,861

3,877

3,884

3,882

3,870

3,847

3,811

3,761

3,697

3,616

3,516

3,397

3,256

3,092

2,902

2,683

2,435

2,153

1,835

1,477

1,078

632

136

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

Less

Tax on

Earnings

1,440

1,090

1,105

1,119

1,131

1.142

1,151

1,158

1,163

1,165

1,165

1,161

1,154

1.143

1,128

1,109

1,085

1,055

1,019

977

928

870

805

730

646

550

443

323

190

41

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

Less

Withdrawal

1,606

1,704

1,809

1,920

2,038

2,164

2,297

2,438

2,589

2,749

2,918

3,099

3,291

3,495

3,711

3,942

4,187

4,448

4,725

5, 020

5,334

5,668

6,024

6,403

6,807

7,237

7,696

8,186

8,708

2,361

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

Ending

Balance

60,554

61,394

62,163

62,854

63,456

63,958

64,347

64,611

64,736

64,706

64,506

64,116

63,518

62,691

61,613

60,258

58,602

56,616

54,269

51,528

48,359

44,721

40.576

35,877

30.577

24,624

17,963

10,532

2,266

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

TOTAL WITHDRAWALS:

Excess with Stretch IRA:

492,883 345,018

220,446

124,572

EXfflBIT D

Example of a Stretched Out Roth IRA vs Immediate Liquidation and Investment

Assumes both beneficiaries spend the stretch withdrawal amount each year.

IRA Value on Death of Owner: 100^000

Assumed Earnings Rate: 6.00%

Age of Beneficiary: 40

Beneficiary's Life Expectancy: 43.6

IRA Withdrawal Tax Rate: 0%

Beneficiary's earnings tax rate: 30%

Roth IRA stretch-out withdrawal schedule *

•k

Investment Schedule if Roth IRA liquidated in Year One

Beginning ★ Beginning Less

IRA Plus Less Ending * Balance Plus Tax on Less EndingYear Age Divisor Balance Earnings Withdrawal Balance * After tax Earnings Earnings Withdrawal Balance

1 40 43.6 100,000 6,000 2,294 103,706 ★ 100,000 6, 000 1, 800 2,294 101,906

2 41 42.6 103,706 6,222 2,434 107,494 * 101,906 6,114 1,834 2,434 103,752

3 42 41.6 107,494 6,450 2,584 111,360 * 103,752 6,225 1,868 2,584 105,526

4 43 40.6 111,360 6,682 2,743 115,299 * 105,526 6,332 1, 899 2,743 107,215

5 44 39.6 115,299 6,918 2, 912 119,305 * 107,215 6,433 1,930 2,912 108,806

6 45 38.6 119,305 7,158 3,091 123,373 * 108,806 6,528 1,959 3,091 110,285

7 46 37.6 123,373 7,402 3,281 127,494 * 110,285 6,617 1,985 3,281 111,636

8 47 36.6 127,494 7,650 3,483 131,660 * 111,636 6,698 2,009 3,483 112,841

9 48 35.6 131,660 7,900 3,698 135,861 * 112,841 6,770 2,031 3,698 113,882

10 49 34.6 135,861 8,152 3, 927 140,086 ★ 113,882 6,833 2,050 3, 927 114,739

11 50 33.6 140,086 8,405 4,169 144,322 ★ 114,739 6,884 2,065 4,169 115,389

12 51 32.6 144,322 8,659 4,427 148,555 * 115,389 6, 923 2, 077 4,427 115,808

13 52 31.6 148,555 8, 913 4,701 152,767 * 115,808 6, 948 2, 085 4,701 115,971

14 53 30.6 152,767 9,166 4, 992 156,940 * 115,971 6,958 2, 087 4,992 115,849

15 54 29.6 156,940 9,416 5,302 161,055 * 115,849 6, 951 2, 085 5,302 115,413

16 55 28.6 161,055 9,663 5,631 165,087 ★ 115,413 6, 925 2, 077 5,631 114,629

17 56 27.6 165,087 9,905 5,981 169,Oil ★ 114,629 6, 878 2,063 5,981 113,462

18 57 26.6 169,Oil 10,141 6,354 172,797 ★ 113,462 6,808 2, 042 6,354 111,874

19 58 25.6 172,797 10,368 6,750 176,415 * 111,874 6, 712 2, 014 6,750 109,822

20 59 24.6 176,415 10,585 7,171 179,829 ★ 109,822 6,589 1,977 7,171 107,264

21 60 23.6 179,829 10,790 7,620 182,999 * 107,264 6,436 1,931 7,620 104,149

22 61 22.6 182,999 10,980 8, 097 185,881 * 104,149 6,249 1,875 8, 097 100,426

23 62 21.6 185,881 11,153 8,606 188,429 * 100,426 6,026 1,808 8,606 96,038

24 63 20.6 188,429 11,306 9,147 190,587 * 96,038 5,762 1,729 9,147 90,924

25 64 19.6 190,587 11,435 9,724 192,299 * 90,924 5,455 1, 637 9,724 85,019

26 65 18.6 192,299 11,538 10,339 193,498 ★ 85,019 5,101 1,530 10,339 78,252

27 66 17.6 193,498 11,610 10,994 194,114 * 78,252 4,695 1,409 10,994 70,544

28 67 16.6 194,114 11,647 11,694 194,067 * 70,544 4,233 1,270 11,694 61,813

29 68 15.6 194,067 11,644 12,440 193,271 •k 61,813 3,709 1,113 12,440 51,969

30 69 14.6 193,271 11,596 13,238 191,629 * 51,969 3,118 935 13,238 40,914

31 70 13.6 191,629 11,498 14,090 189,037 * 40,914 2,455 736 14,090 28,542

32 71 12.6 189,037 11,342 15,003 185,376 * 28,542 1,713 514 15,003 14,738

33 72 11.6 185,376 11,123 15,981 180,518 ★ 14,738 884 265 15,357 0

34 73 10.6 180,518 10,831 17,030 174,319 * 0 0 0 0 0

35 74 9.6 174,319 10,459 18,158 166,620 * 0 0 0 0 0

36 75 8.6 166,620 9,997 19,374 157,243 * 0 0 0 0 0

37 76 7.6 157,243 9,435 20,690 145,987 * 0 0 0 0 0

38 77 6.6 145,987 8,759 22,119 132,627 * 0 0 0 0 0

39 78 5.6 132,627 7, 958 23,683 116,901 * 0 0 0 0 0

40 79 4.6 116,901 7, 014 25,413 98,502 * 0 0 0 0 0

41 80 3.6 98,502 5, 910 27,362 77,051 * 0 0 0 0 0

42 81 2.6 77,051 4, 623 29,635 52,039 •k 0 0 0 0 0

43 82 1.6 52,039 3,122 32,524 22,637 k 0 0 0 0 0

44 83 0.6 22,637 1,358 23,995 0 k 0 0 0 0 0

45 84 0.0 0 0 0 0 * 0 0 0 0 0

46 85 0.0 0 0 0 0 k 0 0 0 0 0

47 86 0.0 0 0 0 0 k 0 0 0 0 0

48 87 0.0 0 0 0 0 k 0 0 0 0 0

49 88 0.0 0 0 0 0 k 0 0 0 0 0

50 89 0.0 0 0 0 0 k 0 0 0 0 0

51 90 0.0 0 0 0 0 k 0 0 0 0 0

52 91 0.0 0 0 0 0 k 0 0 0 0 0

53 92 0.0 0 0 0 0 k 0 0 0 0 0

54 93 0.0 0 0 0 0 k 0 0 0 0 0

TOTAL IRA WITHDRAWALS: 492,883 k

Liquidation Withdrawals

Difference:

232,275 <-

260,608

232,275